The housing crisis in Australia continues to be an incredibly competitive and challenging market for buyers, especially those looking to buy their first home. Recent assessments reveal that cities like Sydney and Melbourne rank among the least affordable globally, highlighting persistent issues surrounding housing affordability in the nation. Experts warn that the worst of these challenges may still be ahead.
Current statistics illustrate that the ratio of real median house prices to real household disposable income stands at a staggering 7.9. This excessive ratio shows a large inequity in Australia. Income is woefully inadequate to cover the cost of a home. Earlier this year, debt servicing costs on housing as a share of disposable income hit all-time highs. This wave only intensified the heat for future home buyers.
Historical Trends in Home Prices and Income Growth
Since 1990, real home prices in Australia have more than doubled. They have far outgrown real household disposable income which has only increased by 2.9 percent per year, with health care growing an average of 3.3 percent annually. As in many countries today, home prices are rising much more quickly than incomes in Australia. This trend is creating a growing barrier for more Australians to participate in the housing market.
“While this trend is expected to continue in coming years, there is little cause for celebration.” – National Housing Supply and Affordability Council
The prevailing economic context today highlights that interest rates are short-term primary drivers of property prices today. It seems like long-term stabilizing forces of their own are starting to take hold, offering some hope for prospective buyers. Fingers crossed Experts are hopeful that with this added stabilization, we could see a return to a more balanced market in the years ahead.
Regional Price Growth Forecasts
Into the future, projections have different increases in dwelling prices predicted for each of Australia’s capital cities in 2025. Darwin will be the fastest growing annual population at 13 percent. Hot on their heels are Brisbane at 8 percent, Perth at 7 percent and both Adelaide and Canberra at 6 percent. The national annual price growth figure is expected to be 6 percent.
“We now expect growth of 6 percent in 2025 (previously 4 percent) and 4 percent in 2026 (previously 5 percent),” – National Housing Supply and Affordability Council
Though this forecast is a sign of positive developments in the housing market, it still highlights the painful persistence of affordability struggle. People hoping to buy houses can take solace in these forecasts. Despite the optimism, many are understandably gun-shy, thanks to the long historical shadow and current economic headwinds.
The Future of Housing Affordability
Even with the marginal improvements, housing affordability will remain an immense hurdle for potential home buyers in all of Australia’s capitals. The National Housing Supply and Affordability Council thinks more population growth is bad for housing. Instead, they forecast that increased construction activity will smooth out the supply/demand imbalance by late-2026.
“The combination of lower population growth and rising construction activity should see the flow of housing supply and demand move closer to balance by the end of 2026,” – National Housing Supply and Affordability Council
After increasing every year since 2020, annual population growth will likely decelerate from 2025 to 2026. This relocation would alleviate some of the pressure on housing demand and prices. Countless would-be buyers will continue to encounter hurdles in their quest for homeownership.
