Housing Market Update: Rising Rents and Home Prices

Australia’s housing market is showing strong momentum. According to CoreLogic’s latest Chart Pack, the total value of residential real estate has climbed to about $12.4 trillion. National dwelling values are up around 9.4% over the past year, adding roughly $78,700 to the median home price. At the same time, advertised inventory remains 17.8% below last year’s level, even as sales have picked up (about 4.1% more homes sold annually). In short, prices are rising on low supply – a classic case of market resilience.

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Rent vs Income: Affordability Squeeze

Meanwhile, rents are surging far faster than incomes. Cotality reports that national rents jumped 43.9% over five years, versus only a 17.5% rise in wages. For perspective, renting households now spend a record 33.4% of their pre-tax income on rent. This is a dramatic shift – before the pandemic incomes generally kept pace with rent. Now, many tenants have far less flexibility in their budgets (as Cotality’s research director Tim Lawless notes). The impact varies by state: Western Australia has seen the steepest rent spike (about +66% in five years), putting huge pressure on borrowers there. In contrast, incomes and rents have tracked closely in the ACT, helping to contain affordability pressures locally.

For renters and first-home buyers, the message is clear: high rents are squeezing savings. Borrowers are dedicating record amounts of income to housing, which makes saving a deposit much harder. As mortgage brokers, we know lenders will factor these higher living costs into borrowing capacity. In practice, that means tighter borrowing power for any household already paying big rent.

What This Means for Borrowers and Brokers

In this environment, mortgage brokers and borrowers need to adjust strategy. Key takeaways include:

• Higher rents, tighter borrowing – With rents up 43.9% vs wages 17.5%, many households have less spare cash. Now that renters spend over 33% of their income on rent, lenders will stress-test budgets more strictly. We advise clients to factor rent (or potential rent) into their living-expense assessments and to aim for extra savings.

• Larger loans and deposits – National home prices have jumped +9.4% in a year, meaning the median borrower needs about $78k more equity than a year ago. This pushes up loan sizes and makes deposit-building tougher. First-home buyers should seek any grants and consider strategies like guarantor loans or family support to reach the higher target.

• Low stock means act fast – With inventory down ~18% year-on-year, and buyer demand up 4.1%, competition for homes is stiff. Pre-approval is more important than ever: having a “yes in principle” loan ready makes you a stronger buyer.

• State-based strategies – Conditions differ by state. In WA, where rents are through the roof, we help borrowers consider alternate strategies (like moving within the market or securing a loan on extra buffer).

Overall, we see that higher rents and home prices are squeezing borrowers. First-home buyers may need to save longer or adjust their strategy, and existing owners might review their loan structure (for example, fixing part of the rate or using an offset account). As brokers, we guide clients to “stress-test” their budgets, focus on the loan structure that suits their goals, and build in contingency plans.

Ready to make your move? For tailored advice or to discuss your buying strategy, contact Ask Financials. Call us on 0433 944 055 or book a free consultation today. Follow us on Instagram and LinkedIn for more tips and updates.