Property Prices Still Rising - But Affordability Is Starting to Bite

Jul 28, 2025

3 min read

Property prices are still going up in most major cities, but things are cooling slightly. Rate cuts and low housing supply are keeping demand strong, but buyers are hitting their limit on what they can afford. The pace of growth is slowing... but it’s still growth.

Here’s a straight breakdown of what’s going on, backed by current data, and what it means if you’re looking to buy.

Prices Are Still Climbing, Just Slower

Domain’s latest Price Forecast Report shows property prices are expected to rise through FY26. Sydney and Melbourne are both set for solid gains:

Sydney: Up 7% - median $1.83 million
Melbourne: Up 6% - median $1.11 million
Brisbane, Perth, Adelaide: All tipped to grow 4-5%

Units are also back in focus. Demand is rising as more buyers are priced out of detached homes. Nationally, unit prices are forecast to rise between 3-6%, and in most capital cities (except Melbourne and Canberra), unit values are expected to hit record highs.

For suburb-level detail, Domain also highlighted which areas could see the biggest price jumps if interest rates keep falling.

Rate Cuts Are Driving Borrowing Power Up

So far this year, the Reserve Bank has made two cuts. When interest rates drop, borrowing capacity goes up and buyers can afford more. Based on past trends, every 1% cut in the cash rate increases dwelling values by around 6.1%. That lines up with what we’re seeing on the ground.

Population Up, Supply Down... Again

The ABS data shows Australia's population grew by 1.7% last year over 440,000 people. But only around 45,000 new homes were completed across Australia in 2024, according to the ABS building activity figures.

That’s a big mismatch.

Approvals have improved slightly this year - 21,356 homes approved in the first five months of 2025, up from 18,197 over the same period last year but it’s still not enough to ease the pressure.

On the resale side, listings have gone up slightly (just 1% nationally), based on SQM Research’s June 2025 report, but supply is still tight compared to long-term trends.

Affordability Pressure Is Getting Real

Even with rate cuts, housing remains expensive for most families. The Real Estate Institute of Australia says the average family is spending nearly 48% of their income on mortgage repayments. In NSW, that jumps to almost 57%.

That kind of mortgage stress is forcing more people to compromise - looking at units, outer suburbs, or townhouses instead of freestanding homes.

A recent Finder survey showed that 1 in 7 first-home buyers have completely drained their savings after buying. A third have less than $10,000 left in the bank.

But There’s Still a Window

Inflation is easing and cost-of-living pressures are starting to settle. That gives the Reserve Bank room to make further cuts if needed, which could drive even more demand.

At the same time, government support is still in place. The Home Guarantee Scheme opened 50,000 new places this financial year, and state-level incentives are still active - especially for first-home buyers.

What to Do Now

If you’re thinking about buying, now’s the time to get your finances in shape. Even if prices aren’t surging like they were, competition is still strong - and borrowing power could go up again if rates drop further.

Having a clear plan, knowing what you can borrow, and understanding what help is available can put you ahead of the pack.

That’s where we can help. If you want a straightforward look at your numbers and a game plan that makes sense, let’s talk.