Housing Affordability Declines Despite Falling Prices
A recent analysis reveals that home affordability for couples and singles in Australia has worsened, despite falling property prices, as rising interest rates continue to strain budgets.
Recent data indicates that home affordability in Australia is declining, even as property prices fall. A study by Compare the Market shows that couples earning a typical combined income of approximately $135,000 can now afford a median-priced home in only 5 percent of suburbs nationwide, a significant decrease from 53.63 percent a year ago. For singles, affordability has plummeted to just 2.83 percent of suburbs, down from 6.24 percent in 2025.
Property expert Andrew Winter noted the perplexing nature of the current market, stating, "It’s a weird time. Property values are coming down, which should make homes more affordable, but higher interest rates are wiping out those gains by squeezing borrowing power." The analysis measured affordability by determining if repayments on an 80 percent loan exceeded 30 percent of household income.
David Koch, economic director at Compare the Market, emphasized that rising interest rates significantly impact borrowing power and monthly repayments. He remarked that while falling property values could help, substantial decreases would be necessary to make a real difference, potentially leading to negative equity for recent buyers. The Reserve Bank of Australia is widely expected to announce another interest rate hike on Melbourne Cup Day, further complicating the situation for prospective home buyers.