Higher interest rates offset softer prices as housing affordability holds steady
Housing affordability was relatively stable over the June quarter 2026, as relief from softer house prices and smaller average loans was largely absorbed by higher interest rates, according to the Real Estate Institute of Australia’s latest Housing Affordability Report.
REIA President Jacob Caine said the proportion of median family income required to meet average home loan repayments increased marginally to 50.9 per cent.
“Housing affordability declined by just 0.1 percentage points over the quarter, but we have seen a 3.3 percentage point decline over the year,” Mr Caine said.
“While softer property prices and smaller average loans provided some relief, the benefit to home buyers was largely offset by the increase in borrowing costs during the quarter.”
The cash rate increased by 25 basis points in May to 4.35 per cent and remained unchanged in June. The quarterly average standard variable interest rate subsequently rose to 8.8 per cent.
The average monthly loan repayment reached $6,018, an increase of 1.5 per cent over the quarter and 12.4 per cent over the past year.
At the same time, the average owner-occupier loan decreased by 0.6 per cent over the quarter to $730,719, while the Australian weighted average median house price declined by 1.2 per cent to $1,135,560.
“The June quarter highlights the competing forces shaping housing affordability,” Mr Caine said. “Without the decline in house prices and average loan amounts, affordability would likely have deteriorated more significantly following the May interest rate increase.”
“The relatively small national movement should not obscure the pressure households are experiencing, with average repayments now more than 12 per cent higher than a year ago.”
Housing affordability varied considerably across the country. It improved in New South Wales and Victoria, remained stable in Tasmania, and declined in every other state and territory.
Western Australia recorded the largest quarterly decline, with the proportion of median family income required to meet average loan repayments increasing by 1.6 percentage points to 47.5 per cent.
New South Wales remained the least affordable jurisdiction for home buyers, with average loan repayments requiring 57.7 per cent of median family income. The Australian Capital Territory remained the most affordable at 34.4 per cent, supported by the nation’s highest median family income.
Rental affordability remained stable nationally over both the quarter and the year, with 23.9 per cent of median family income required to meet the median rent. It improved modestly in New South Wales, Queensland, and the Australian Capital Territory, but declined in all other jurisdictions.
The Northern Territory recorded the largest decline, with the proportion of median family income required to meet rent increasing by 3.0 percentage points to 28.8 per cent following a sharp rise in median rent.
“The national rental figure was unchanged, but conditions differed significantly between jurisdictions,” Mr Caine said. “The Northern Territory is now Australia’s least affordable rental jurisdiction, while the Australian Capital Territory remains the most affordable, with median rent requiring 18.5 per cent of median family income.”
First home buyer activity increased during the quarter, with 30,129 new loan commitments, up 11.0 per cent from the March quarter and broadly unchanged from a year earlier. First home buyers accounted for 36.3 per cent of all owner-occupier commitments.
Their average loan decreased by 0.6 per cent over the quarter to $610,063, but remained 10.0 per cent higher than in the June quarter 2025.
Mr Caine said the results were recorded during a period of significant change in Commonwealth housing and taxation policy.
“Measures intended to improve opportunities for first home buyers and direct investment towards new construction must also be assessed against their impact on rental supply, investor confidence, and new housing delivery,” he said.
“Stable and predictable investment settings are essential, particularly while higher interest rates are already increasing financing costs for households and housing projects.
“Addressing affordability requires coordinated action on planning, enabling infrastructure, construction capacity, taxation, and investment settings, with a sustained focus on increasing housing supply.”
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Media contact:
Cody Vella, REIA Media and Communications Manager
0447 611 102 | cody.vella@reia.com.au
