Rate Cuts Drive Australia First-Home Buyers Into the Market: Is 'FOMO' Inflating Affordable Properties? Are 5% Deposits a Hidden Risk?
Sydney’s property market is showing clear signs of recovery following two interest rate cuts by the Reserve Bank of Australia (RBA) in 2025. According to the latest First Home Buyer Report by property website Finder, the high interest rate environment over the past two years had kept many potential buyers on the sidelines. However, as the rate-cut cycle begins, market confidence is gradually returning. The report reveals that over 60% of first-home buyers say lower interest rates have directly influenced their decision to purchase, prompting them to enter the market sooner.
In addition to rate cuts, various government incentives have played a crucial role in boosting demand. These measures include low-deposit home loans, stamp duty exemptions, and first-home buyer grants, all of which have lowered the barriers to entry for young people and first-time buyers. Experts note that these policies have not only increased borrowing capacity but have also intensified the “FOMO” (fear of missing out) sentiment in the market. The Finder report highlights that the proportion of first-home buyers motivated by fears of further price increases has risen from 31% last year to 38% this year, indicating growing urgency among buyers.
Sydney’s housing supply remains tight, with limited new developments and fierce competition among buyers. Industry consensus suggests that, with more buyers entering the market and ongoing supply shortages, Sydney property prices are expected to rise by approximately 7% over the next year. Some areas, such as Western Sydney and the Inner West, may see even stronger growth due to improved transport links and infrastructure upgrades.
However, experts caution that while low-deposit loans help first-home buyers get onto the property ladder, those who fail to carefully assess their repayment capacity may face “mortgage prison” risks. This could become a problem if interest rates rise again, increasing repayment pressure and making it difficult to refinance or sell properties. Buyers are advised to make prudent decisions based on their financial situation and avoid being swept up in the market frenzy.
In summary, rate cuts, government incentives, and market sentiment are the three main drivers behind the expected rise in Sydney property prices. With first-home buyers actively entering the market, Sydney’s property sector is likely to remain buoyant over the next year, with prices forecast to increase by around 7%.