A combination of the recent drop in property values and reduced interest rates has led to Australian real estate being the most affordable since 2016 – incidentally the last time the RBA cut the official cash rate, until this week.

The finding came from research commissioned by CoreLogic and ANZ, which was one of the big four banks that chose not to pass on the full 0.25% cut decided by the RBA on Tuesday.

In some parts of the country, it’s the cheapest time to buy in decades. Buyers in Darwin and Perth, for example, are enjoying the most affordable conditions since September 2004.

In many suburbs, it’s now cheaper to buy than it is to rent, said ANZ’s Home Owners Lead, Kate Gibson.

“Buying a home is an aspiration for many Australians and for the first time, we’re seeing suburbs and towns in every state where it is more affordable to buy than rent,” she said.

“This shift, combined with record low interest rates, is driving more first home buyers to look at entering the market. For the first time in fifteen years, most buyers are not chasing a rising market.”

CoreLogic’s Head of Research, Cameron Kusher, said house prices will begin rising modestly in 2020.

“The recent drop in property values follows a long period where prices increased at a much faster pace than household incomes,” he said.

“We predict that price falls will settle later this year, followed by modest price growth starting from 2020.”

Mr Kusher’s comments come after the RBA cut the official cash rate by 25 basis points to a new record low of 1.25% this week, and follows a shift in sentiment following the Coalition’s shock election victory which ended the threat of negative gearing.

CoreLogic figures released ahead of Tuesday’s rate cut showed the pace of the property market decline had slowed, suggesting the downturn may be nearing the end.

The Adelaide Bank/REIA Housing Affordability report also showed that housing affordability is improving.

REIA President, Adrian Kelly said the RBA’s decision to cut interest rates will see housing affordability improve even more.

“Subject to the banks passing on the full cut, for a first home buyer this means a saving of $70 per month based on an average loan size of $338,000 in the March quarter of 2019,” Mr Kelly said.

Sydney is still the most expensive property market, followed closely by Melbourne.

Hobart is now the least affordable capital city for renters, while Darwin is the most affordable capital city for buyers.

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