Westpac sees tight supply lifting housing markets with a discernible shift in response to lower interest rates. Price growth has lifted, auction clearance rates are up, and more people say it is 'time to buy'

By Matthew Hasson*

Our latest Housing Pulse finds a discernible shift in Australia’s housing market. Buyers are perking up, price growth has lifted, auction clearance rates are rising and supply is tightening. Indeed, current signals suggest we are heading for a very interesting Spring selling season. 

Housing-related sentiment has turned. Our ‘time to buy a dwelling’ index surged a further 10% in August, buoyed by a third 25bp interest rate cut from the RBA and a clearer signal that some further easing can be expected. Price expectations remain bullish and unemployment expectations point to little concern about jobs. Its not quite ‘all systems go’ – consumer risk aversion is still elevated – but there is enough to suggest turnover will see a decisive rise into year-end, potentially in the 10-15% range.

Measures of current conditions are also showing a shift. Auction clearance rates have lifted to around 70% in Sydney and Melbourne and price growth nationally has ticked up to a 0.6-0.8% monthly pace.

The issue is that buyers are often quicker to respond to changes than sellers. Across the major capital city markets, there are currently around 68k listings, a 15yr low equal to 2½ months of sales – we are usually closer to 3½ months. Monthly new listings are lagging sales by about 7.5k. If demand rises 10-15% from here, sparks may fly.

The wider picture on new dwelling supply is a little more promising. Approvals are running ahead of expectations with even some lift in ‘higher density’ building starting to show through. But a meaningful increase in dwelling completions is still a long way off. We have raised our forecasts for approvals but the lift in completions is still not expected to land until late 2026 with a risk that it arrives later.

We have also revised up our forecasts for prices. The stronger near-term impetus is now expected to see prices finish up 6% for calendar 2025 and rise a further 9% in 2026. Evidence suggests there have been some structural changes around the share of non-debt funding of dwelling purchases, some of which relates to increased inter-generational support for first home buyers. That in turn suggests stretched affordability may be slightly slower to ‘bite’.

As always, our full report details how patterns differ across markets. We also take a closer look at regional areas and explore new Westpac-DataX Consumer Panel data grouping consumers by housing tenure.

Matthew Hassan is the Head of Australian Macro-Forecasting, at Westpac. The full report is here.