




Aussie home prices to rise on interest rate cuts, affordability worries persist: Reuters poll


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Australia’s Housing Market: Prices climb, rate cuts loom, but affordability remains a concern
September 10, 2025 – Reuters
A recent Reuters investigation into Australia’s residential real‑estate landscape paints a picture of a market that is simultaneously buoyant and burdened. Over the past twelve months, median home prices have risen by more than five per cent, a climb that has left many Australian households worrying that the next wave of interest‑rate cuts may come too late to stave off a sharp affordability crisis.
1. Rising Home Prices Across the Nation
The article opens with CoreLogic’s latest quarterly data, showing that the median house price in the Australian Capital Territory (ACT) and New South Wales (NSW) has increased by 5.2 % in the last year, while the overall national median has jumped 4.8 %. “This is the steepest single‑year gain we’ve seen since 2018,” notes the analyst quoted in the piece, referencing CoreLogic’s own report that tracked every transaction in the market.
In the capital, Canberra has seen a 6.1 % rise in median prices, whereas Sydney’s market has grown 5.5 %. The more rural states—Queensland (Qld) and Victoria (VIC)—have also reported gains, but at a slightly slower pace (4.1 % and 4.7 % respectively). The article underscores that these price movements are unevenly distributed: while the “Big Three” metros (Sydney, Melbourne, Brisbane) drive most of the national growth, several regional centres such as Adelaide and Perth have experienced modest increases of 2.8 % and 3.3 %.
2. Interest‑Rate Policy: From Tightening to Cutting
The Reserve Bank of Australia (RBA) has been a central player in the housing story. In the RBA’s June 2025 policy statement, the central bank’s “statistical analysis” suggested that inflation would remain above the 2–3 % target until the third quarter of 2026. To keep the economy on track, the RBA raised the cash rate to 3.25 % in May, its highest level since the late 1990s.
However, the Reuters piece argues that the higher rates are already beginning to cool borrowing demand. CoreLogic’s “Mortgage Stress Index” indicates that the percentage of households spending more than 30 % of gross income on mortgage repayments has risen from 18.3 % in 2024 to 22.7 % in the current year. The article cites an interview with Dr. Emily Tan, an economist at the Australian National University, who warns that “if the RBA is to keep inflation in check, it will have to keep rates on the high side for longer than many policymakers expected.”
The report notes that several major banks are already signaling the possibility of rate cuts in late 2025 or early 2026 to stimulate loan growth. Yet, these cuts may be too small to offset the damage already done by rising rates, leaving borrowers with higher monthly payments and stunted growth in housing demand.
3. Affordability: The Persistent Pain Point
One of the article’s central themes is affordability. The Housing Affordability Index—calculated by the Australian Bureau of Statistics and the Commonwealth Bank—shows a 12 % decline in the median household’s ability to purchase a home over the past year. While house prices have risen, wages have lagged, and the real‑interest‑rate environment has made many Australians unable to secure a mortgage without taking on excessive debt.
“Affordability is not just about the price of a home; it’s about the entire cost of living,” says James O’Connor, a senior analyst at Australian Equity Group, quoted in the article. “When you add in the cost of borrowing, the tax implications, and the general rise in living expenses, the gap widens.” O’Connor further points out that the affordability gap is most pronounced in the major capital cities, where median household incomes have only risen by 1.9 % annually compared to a 4.8 % increase in median house prices.
The article also references a recent study by the Commonwealth Bank, which found that only 15 % of first‑time buyers in Sydney and Melbourne can afford a median‑priced home after taxes and loan repayments—down from 22 % in 2024.
4. Regional Disparities and Future Outlook
While the article emphasises the challenges in the larger metros, it also highlights that regional markets are not immune. In regional Victoria, for example, median house prices have outpaced those in the national average, partly due to migration flows and a shortage of supply. The report quotes property developer Sarah Liu, who argues that “the supply constraints in regional areas are creating pockets of affordability that can be leveraged by targeted policy.”
The article ends on a note of cautious optimism. It cites the RBA’s statement that the “economy remains resilient,” and notes that a possible rate cut could provide a “breathing space” for the housing market. However, it stresses that without a coordinated policy package—including a focus on supply-side reforms and targeted tax relief—the affordability concerns will persist.
5. Key Takeaways
- Median home prices have surged by around 5 % year‑on‑year across most Australian states, with the most significant gains in the capital cities.
- Interest‑rate policy remains tightening, but banks are signalling potential cuts as a counter‑measure to the cooling demand.
- Affordability has deteriorated sharply, with a 12 % decline in the Housing Affordability Index over the past year, driven by stagnant wages and high borrowing costs.
- Regional markets show mixed results, with some areas experiencing price growth outpacing affordability gains.
- Future policy decisions—including possible RBA rate cuts and supply‑side measures—will determine whether the housing market can sustain its growth without exacerbating affordability issues.
The Reuters piece is a timely reminder that Australia’s housing market is at a crossroads: it is expanding in price but tightening in accessibility. The next policy decisions, both by the RBA and the federal government, will decide whether the market’s growth is a boon for property owners or a risk for the next generation of Australians who will struggle to buy their first home.
Read the Full reuters.com Article at:
[ https://www.reuters.com/world/asia-pacific/aussie-home-prices-rise-interest-rate-cuts-affordability-worries-persist-2025-09-10/ ]