Falling House Prices Aren't Fixing Affordability
New REIA data shows average mortgage repayments have jumped 12.4% in a year to $6,018 per month — even as house prices softened slightly.
For most Australians, the logic seems straightforward: if house prices fall, buying a home should get easier. The latest data from the Real Estate Institute of Australia tells a more uncomfortable story.
During the June quarter, Australia's national weighted average median house price declined 1.2 per cent to $1,135,560 — its first quarterly fall since September 2024. The average owner-occupier loan size also edged lower, down 0.6 per cent to $730,719. Both movements should have improved the position of prospective buyers. Instead, the proportion of median family income required to meet average home loan repayments ticked up to 50.9 per cent. The typical Australian borrowing household is now spending just over half of its income servicing its mortgage.
Property Update's Adam Hubbard, reporting on the REIA's Housing Affordability Report, put it clearly: "affordability shouldn't be viewed simply through the prism of property prices."
Why the Maths Is Working Against Home Buyers
The mechanism is frustrating in its simplicity. In May, the RBA raised the official cash rate by 25 basis points, bringing it to 4.35 per cent. That increase flowed through to the average standard variable mortgage rate, which lifted to 8.8 per cent for the quarter. As a result, the average monthly mortgage repayment climbed to $6,018 — a 1.5 per cent rise over the quarter and a 12.4 per cent increase over the year.
Buyers borrowed slightly less and paid slightly less for their homes, but the cost of servicing that debt rose sharply enough to absorb all the benefit. Higher interest rates are effectively cancelling out lower prices.
The picture also splits sharply by state. New South Wales remains Australia's least affordable jurisdiction, with average mortgage repayments consuming 57.7 per cent of median family income — an extraordinary burden by any measure. Western Australia recorded the largest quarterly deterioration, with repayments rising to 47.5 per cent of income. At the other end of the scale, the ACT is the most affordable jurisdiction at 34.4 per cent, supported by comparatively high household incomes.
Affordability actually improved in New South Wales and Victoria over the June quarter, and remained steady in Tasmania — but it deteriorated across every other state and territory. The national headline figure can mask very different local experiences.
The Rental Market Offers No Relief Either
If ownership is under pressure, the rental market offers little relief for those waiting on the sidelines. The national median rent for a three-bedroom house rose 1.2 per cent over the June quarter to $651 a week, according to MPA Australia, citing REIA data. Over the year, the increase was 4.8 per cent.
Darwin posted the steepest jump of any jurisdiction — up 12.7 per cent for the quarter alone and 19.5 per cent over the year. Hobart and Perth also recorded continued rent growth. National rental affordability remained broadly stable, with median rent requiring 23.9 per cent of median family income across the country. But the jurisdictional differences are significant. The Northern Territory experienced the steepest deterioration, with rents consuming 28.8 per cent of income. The ACT remained Australia's most affordable rental market at 18.5 per cent of income.
Vacancy rates confirm the structural undersupply. SQM Research data cited by MPA Australia shows every capital city sitting below the 3 per cent threshold generally considered a balanced rental market. Adelaide is the tightest at 0.7 per cent, with Perth at 0.6 per cent. Even the relatively easier markets of Sydney (1.7 per cent) and Canberra (2.1 per cent) remain firmly in undersupply territory.
REIA president Jacob Caine linked the divergence between softening sale prices and rising rents directly to Australia's underlying housing shortage, warning that policies weakening investment confidence risk making the imbalance worse.
What This Means for First-Home Buyers Right Now
Despite the headwinds, first-home buyer activity actually increased during the June quarter. There were 30,129 new first-home buyer loan commitments — an 11 per cent increase from the March quarter, accounting for 36.3 per cent of all owner-occupier loan commitments. Their average loan size fell slightly to $610,063, though it remains 10 per cent higher than a year earlier.
That pattern suggests real pent-up demand. Many first-home buyers are still finding pathways forward, even under elevated borrowing costs.
The data reported by Property Update underscores a broader lesson for anyone waiting on the sidelines: a fall in house prices is not the same as improved affordability. If rates continue rising through the remainder of 2026 — and the RBA has raised them three times this year already — any further price softening could once again be absorbed by higher repayment costs.
For buyers trying to navigate the current environment, start with the numbers that matter to your household. Our borrowing power calculator lets you model different rate scenarios against your income and deposit size. If you are ready to compare what lenders are currently offering first-home buyers, our first home buyer home loan comparison provides a current market view.
For existing borrowers, the best hedge against ongoing rate pressure is ensuring you are not paying more than necessary today. See how your rate stacks up on our home loan comparison page.