Australian home prices have dropped by an average of $63,000 nationally since the start of the year, but stricter lending conditions have offset these gains for potential buyers. Analysis by HomeLoanRates.com.au and Primara Research shows that a typical buyer who could afford the median-priced home in January would now fall short by $45,000 on the same income. This disparity arises because the Reserve Bank of Australia’s four interest rate hikes this year reduced borrowing power by 10.5%, outpacing the 6.7% decline in home values.
Primara Research head of data Peter Drennan noted that the usual trade-off of price falls, where owners lose equity but new buyers gain affordability, has disappeared this year. ‘Owners are poorer on paper and buyers are no closer, so the market is falling with no one on the winning side,’ he said. The median home has lost about $63,400 in value, yet new buyers face a growing shortfall with each rate hike.
First-home buyers have been particularly hard hit, with lending activity dropping by 8.6% over the September quarter, the steepest decline since records began in 2022. Compare the Market economic director David Koch attributed this to rising living costs, including higher insurance premiums, which have further squeezed household budgets. Commonwealth Bank and ANZ predict home prices will bottom out in late-2027, but Drennan cautioned that first-home buyers may not fully benefit unless interest rates also fall.