Property prices across Melbourne and Sydney are set to hit new peaks by the end of 2023 as an extended pause in interest rates supports a rebound in values, a leading expert predicts.

Economists believe the next move for rates is more likely to be down than up after the Reserve Bank on Tuesday moved to hold the cash rate target at 4.1 per cent for the third straight month.

And with the prospect of further mortgage pain looking more remote, housing markets are heading into the all-important spring selling season with a “head full of steam”, according to My Housing Market chief economist Andrew Wilson.

Dr Wilson, who accurately predicted the last housing market cycle,  says confidence has well and truly returned now that sellers have digested a sharpening rebound in property prices.

“It is catch-up energy to some degree,” he said.

“Interest rates have been on hold for four of the past five months – that’s providing significant relief, especially taking into account rising [nominal] wages. It’s positive for the market.

“Given the [property] price rises we’ve seen so far … we’d expect to find those peak prices [in Melbourne and Sydney] by the end of the year.”

It comes as fresh figures from CoreLogic show the value of Australia’s property market has risen back to $10 trillion in recent months, its highest value since June 2022, owing to a rapid rebound in home values.

Property prices nationally have risen 2.5 per cent over the three months to September, according to CoreLogic figures, in a rebound that began even before rates went on ice.

Brisbane has led the initial upswing, with prices rising 4.2 per cent, while Sydney (3.8 per cent) and Melbourne (1.6 per cent) have also posted strong gains heading into the spring months.

Sellers are already coming back into the market to cash in.

Figures from SQM Research show stock across Sydney rose 10.5 per cent last month, while new listings climbed by 12.6 per cent in Melbourne.

First-home buyers to struggle

A growing expectation that interest rates have peaked, or are near a peak, should help to lift consumer sentiment from the recession-like lows that have persisted over the past nine months.

But while interest rates are unlikely to rise further, there are concerns that an extended period with the target at 4.1 per cent could limit the market after prices recover 2022 losses.

CoreLogic research director Tim Lawless thinks it may be “too soon” for the cash rate pause to have a “significant impact” on demand among buyers.

“Although housing values have trended higher in the past few months, the recovery trend is occurring across volume that remains slightly below the five-year average,” he said.

“A more robust recovery in housing market activity is likely to be constrained by high interest rates and affordability hurdles in the short term.”

Dr Wilson said the question of “what comes next” for the property market is about how values fare once major capitals have rebounded to earlier peaks, particularly if rate cuts are a way off.

And on that front, there are some clear risks on the horizon – including negative real wage growth and rapidly rising rents.

In other words, cost-of-living pressures could restrain buyer activity, particularly for first-home buyers who are often paying rent as they save for a deposit.

“The bigger picture here is the fall in real wages,” Dr Wilson said.

“It’s an underlying negative for the market.”

Figures on first-home buyer activity in July were unavailable as the ABS works through reporting issues with the prudential regulator, but earlier figures do indicate that activity has plunged.