Australian homes are set to become less and less affordable. Picture: Sam Mooy

ANALYSIS

Today, housing is at its most affordable point ever.

Not the most affordable it ever ‘has been’ but the most affordable it ever ‘will be’.

Tomorrow, it will be slightly less affordable, but still more affordable than in the days, months and years that follow.

It’s a big claim, but it’s impossible to see how affordability can somehow improve from here. When REA Group data firm PropTrack launched its Housing Affordability Index (HAI) in 2023, it showed housing affordability was at its worst level in traceable history, in all capital cities except for Brisbane.

In its second year in 2024, the index broke its own record for poor housing affordability and this time, Brisbane hit a new low too.

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In 2025, affordability improved by the tiniest measure, thanks mainly to the year’s three RBA rate cuts.

But in the half a year since the last HAI was released, things have changed again.

Home prices have had strong growth and have just hit a new national peak, according to today’s PropTrack Home Price Index January 2026.

National home prices rose by 0.2 per cent over the first month of 2026, to sit 8.4 per cent higher than a year ago.

REA Group’s executive manager of economics Angus Moore.

The median value of capital city houses in Australia is now $1.157 million, after growing by $110,200 since January 2025.

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Report author Angus Moore, REA Group’s executive manager of economics noted that a change in some economic decisions had yet to majorly affect prices.

“Price of growth in 2025 was supported by three rate cuts, but a rate rise at the Reserve Bank’s February meeting is now looking likely,” he said. “While the possibility of further hikes may weigh on the market, unemployment remains very low, which will support demand. At the same time, new housing supply remains limited, supporting home prices.”

That “likely” rate hike on Tuesday will add to the pressure.

Affordability may have already hit rock bottom, but it’s about to start digging.

December inflation numbers came in piping hot like an overpriced loaf of sourdough straight out of the oven.

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So hot that RBA Governor Michele Bullock burnt her hand and had to run it under the kitchen tap.

The biggest contributor to the high inflation numbers was housing, which was up 5.5% year on year, an increase from the 5.2% reading of last month.

New ABS figures revealed the cost of a newly built home is 2.3 per cent higher than a year ago, while Master Builders Australia chief economist Shane Garrett said “a new house is now 47 per cent more expensive than it was just before the pandemic.

“House building costs had been decelerating for much of 2025, but those days are history. Recently, we have seen an escalation in the cost of home building materials while continued labour shortages magnify the damage.”

HOUSING AFFORDABILITY

The Aussie dream is fading for many. Picture: David Crosling

A rate hike will mean more spending on housing, in the form of higher interest on loan repayments for homeowners.

But how much more money can we spend on housing?

Wage growth has managed to match CPI inflation over the past 12 months, but property prices have outgrown both.

Housing affordability is getting worse by the day. When rates are hiked, it will become worse again.

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I put it to Angus Moore that housing affordability would only get worse, forever.

He didn’t quite take the bait on that one, but certainly agreed things were not looking good in the short term.

“We’re not expecting to see affordability improve materially over the next 12 months,” he said. “Wages are growing, which is important to point out and that does offset some of the cost, but mortgage rates going up obviously increases mortgage burdens.

“And the fact home prices are still rising also increases mortgage burdens for new borrowers. So it’s hard to see affordability improving in an environment in which prices are still growing and rates are going up.”

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Rate hikes look likely on Tuesday. Picture: Eric Lee/Bloomberg

“Inflation was stronger than forecast, and I think that’s what the RBA is most acutely focused on. So in that environment, it seems hard for them to make the case to hold at this point,” Mr Moore said.

“No matter how you measure underlying inflation, it looks too strong. And the fact the labour market looks like ending the year pretty strong as well, makes it fairly hard to make the case not to hike.”