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'Outbid' woman enduring two-year property slog reveals tactic Aussie buyers are turning to as housing competition heats up
Australian property prices are expected to rise following the Reserve Bank of Australia's (RBA) decision to cut the cash rate this week. The interest rate cut is set to drive up competition further, leading some borrowers to adopt new strategies to get their foot on the ladder.
Sydney woman Lara Rinaldi has been trying to buy her first home for the last two years. The 32-year-old brand manager and small business owner told Yahoo Finance she had originally hoped to buy a two-bedroom, two-bathroom apartment in the inner west and had a budget of $650,000 to $700,000.
But she's found it hard to break into the market, despite her deposit growing over the time she's been looking and her borrowing power increasing following the RBA's earlier interest rate cuts in February and May.
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'I got close a couple of times but I just didn't happen, whether that was I got outbid eventually or just contract clauses,' she said.
Rinaldi said she's had to keep refreshing her pre-approval and it's now gotten to the point where she has decided to take a different strategy altogether to enter the market.
Instead of buying a home for herself to live in, she is now planning to 'rentvest' and is looking to buy an investment property in southwest Sydney, towards Panania and as far as said buying further out meant she could buy a bigger property and she hopes to buy a two to three-bedroom townhouse with the same budget by the end of the year.
She plans to continue to rent in the inner west to stay close to her family and work, and currently splits her time between renting with her partner and her parents' granny flat.
Rinaldi said it was a strategy some of her friends had taken as well, as Sydney property prices continue to skyrocket.
'I've had quite a few friends buy outside of Sydney or then rent inner Sydney, or I've got friends that are just moving to Brisbane and leaving the Sydney market altogether,' she said.
'It's not even the property market that they're getting priced out of, the cost of living is also affecting them.'
RBA cut expected to bring more buyers into market
Loan Market has recorded a 53 per cent year-on-year surge in home loan pre-approvals and expects numbers will climb further leading into spring following the RBA's cut.
A buyer earning $120,000 a year could see their borrowing capacity increase by around $42,000 following the latest cut, compared to the start of the year.
Mortgage broker Andrew Dunreath-Cooper told Yahoo Finance there would be more confidence in the market following the RBA cut and said it sent a 'definitive message to buyers that interest rates aren't going to go up again for some time'.
Commonwealth Bank economists Luke Yeaman and Lucinda Jerogin expect home prices will grow 6 per cent in 2025 and 4 per cent in 2026, based on the RBA cutting rates in August and again in November.
If the RBA ends up cutting again, in early 2026, the bank said there could be a stronger rise in property prices than forecast.
Since the first rate cut in February, the bank found national home prices had lifted by 3.1 per cent.
The bank expects prices will increase 8 per cent in Brisbane, 5 per cent in Sydney, 5 per cent in Melbourne, 7 per cent in Perth and 6 per cent in Adelaide this year.
RBA governor Michele Bullock said there had been a "fairly gradual recovery in housing activity, broadly", including housing prices, development and dwelling investment.
"Property prices are about supply and demand, ultimately, in the housing market and we don't control that," she said.
"But do know that historically, as interest rates fall, that activity in the housing market picks up. That's exactly what we'd expect."
Housing affordability remains a 'significant challenge'
Housing affordability continues to be a 'significant challenge' for home buyers, particularly first home buyers.
According to the National Housing Supply and Affordability Council, affordability deteriorated in 2024, with roughly half of median household income needed to meet the average mortgage repayments.
Yeaman and Jerogin said the rate of decline in affordability had slowed since 2023 as disposable incomes pick up and financing costs ease, but they said there was 'little cause for celebration'.
While affordability is estimated to improve over the next two years, even as house prices rise, it will 'remain stretched in a historical sense, particularly relative to pandemic lows'.
Dunreath-Cooper said saving for a deposit had been difficult for many first-home buyers who were managing increased costs of essentials like rent, insurance and groceries.
Like Rinaldi, he said he has had several customers look to alternative ways to break into the market.
'I've also had several first-home buyers decide that they're going to focus on buying a more affordable investment property rather than a place to occupy, just so they can get into the market,' he said.
'They'll look to leverage the equity in their investment to buy a property to live in down the track.'
Rinaldi said the RBA's interest rate cut gave her more confidence as a buyer and her ability to pay mortgage repayments.
'There might be future cuts in the next 12 months so I'm more comfortable buying as well without the fear that rates might go up and then I might have more to pay,' she said.
She hopes to eventually buy a place in Sydney with her partner when they start a family in the next few years, but said it would likely still be in southwest in to access your portfolio
