The latest inflation data show Australia’s headline Consumer Price Index (CPI) rose 3.0% in the 12 months to August. Housing costs were the biggest contributor, up 4.5%, driven by rising rents (3.7% y/y). The CPI’s trimmed mean – a core inflation measure – is a cooler 2.6%, suggesting that underlying inflation is easing. In other words, even though some costs spiked (electricity bills jumped 24.6% as rebates expired), the inflation trend is moving back toward the Reserve Bank’s target range. For buyers and investors, this background means borrowing power is holding steady while living costs (especially power and insurance) should be budgeted carefully.
The housing market remains under pressure. ABS data show new home prices are still rising: new-dwelling purchase costs climbed 0.7% year-on-year (0.4% in August) as builders raised prices and cut discounts. Tight rental markets also persist – rents are up 3.7% y/y even as vacancy rates stay low. This points to continued rental demand, which can be a win for investors (steady yields) but adds competition for home buyers. Crucially, with inflation pressures cooling (absent the one-off electricity effect) the RBA is likely to keep interest rates near current levels for now. In short, borrowing power is steady in the near term, and resilient rental demand can support strong yields.
What Buyers Should Do Now
- Timing: Lock in your finance sooner rather than later. Markets expect the RBA to start cutting rates by late 2025, which will boost borrowing power. But don’t wait too long – buyer demand is already rising (borrowers have more capacity thanks to modest wage gains), so acting now can put you ahead of a crowd once rate cuts kick in.
- Strategy: Seek properties with strong rent yield and motivated sellers. Tight rents (up nearly 4% annually) mean good income potential. At the same time, some owners may be willing to negotiate on price (for example, if they need to sell soon or are dealing with higher holding costs). Combining rental yield with vendor concessions gives both cash flow and value upside.
- Product: Choose your loan type wisely and pad your budget. If inflation stays above target, a fixed-rate loan can lock in today’s rates. If cuts arrive as expected, a variable-rate loan could drop in cost. In either case, always allow extra buffer for monthly bills: electricity bills spiked this year, and insurance premiums rose about 2.6% over the year. Stress-test your budget for higher power or insurance bills to ensure you can still cover your mortgage comfortably.
- Asset selection: Compare new builds vs existing homes carefully. New homes have seen recent price hikes – ABS reports new dwelling prices rose 0.4% in August as builders cut discounts – which may leave less room to bargain. By contrast, older stock or off-market deals might offer more negotiation. As buyers’ agents, we suggest scouting suburbs with a mix of new and established homes to balance growth and value.
- Risk checks: Plan for higher living costs. Even if headline inflation is easing, day-to-day expenses are up. The step-up in electricity costs and insurance premiums eats into cash-flow. Ensure your mortgage payments plus bills stay affordable if rates stay flat a bit longer. In practice, that means verifying your borrowing power with a lender or broker and accounting for these extra costs in your household budget.
At Key2Dreamz, our buyer’s agents help you navigate these issues from a home-buyer’s perspective. Whether you’re a first-time buyer or an investor, we offer tailored advice on timing, financing and property choice. For example, our Residential Buyer’s Agent services can guide you through loan pre-approval and budgeting, while our Investment Property experts help target the right high-yield suburbs. First-home buyers may also find our First Home Buying Guide useful for general planning tips.Need help making a decision? Our team is here to assist. Call Key2Dreamz at +61 439 260 917 or book a free consultation online. We’ll give you a clear plan for buying in today’s market, helping you act with confidence before competition heats up.