Australia's housing market is showing modest growth and cautious buyer sentiment in the middle of the year, with rate cuts providing limited momentum as affordability constraints and macro uncertainty continue to weigh on activity, according to a Westpac report published Thursday.

Over the three months to May, the Westpac Melbourne Institute's "time to buy a dwelling" index rose 2.5% to 90, while the Consumer House Price Expectations Index rebounded sharply by 9.3% to 155.5. The Unemployment Expectations Index declined 3.6% to 121.3 in the reported period.

Meanwhile, the Consumer Risk Aversion Index eased slightly to 45 in March from 48 in December 2024.

The report points to a soft property market, with modest price gains and low turnover across capital cities, as affordability pressures and economic uncertainty limit the impact of Reserve Bank of Australia rate cuts.

In Australia, activity among first home buyers, new home buyers, and investors all edged up this year, reaching 2.2%, 10.6%, and 11.5% respectively.

Market activity is concentrated in lower and middle-tier segments, with only slight gains in top-tier areas. Despite emerging latent demand and price optimism, overall sentiment remains weak, the report added.