Mortgage brokers hoping slower price growth will ease pressure on first-home buyers and property investors may be disappointed. Ray White Group chief economist Nerida Conisbee (pictured) says that while Australia’s housing market is starting to cool, with monthly gains slowing and some Sydney prices now edging lower, the fundamentals that drive affordability are moving in the wrong direction.
She argues that the core problem remains supply – in particular the rising cost of building new homes. A combination of labour shortages and earlier supply chain disruptions drove a sharp lift in construction costs through 2022 and 2023, and while that surge briefly moderated, costs never returned to normal. More recently, labour constraints have again been the main driver, with capacity issues in the construction sector keeping a floor under prices.
Conisbee warns that cost pressures are now broadening. The escalation of conflict in the Middle East is pushing up fuel costs and disrupting shipping routes, which is expected to flow through to higher material and construction costs in coming months. That adds a second layer of pressure on top of unresolved labour shortages, making it harder to deliver new stock at viable margins.
Separate analysis from Moody’s Ratings backs that view, warning that “further interest rate rises together with high housing prices are set to worsen affordability for new homebuyers over the rest of 2026”. Moody’s estimates housing affordability at 29.6% as of March 2026 – the share of average after‑tax household income needed to service a typical new 25‑year principal‑and‑interest loan at 80% LVR – up from 28.6% in December 2025. Sydney is the clear outlier, with “Sydney (40.4%) was by far the least affordable city in March,” followed by Brisbane at 31.7%.
Canstar’s modelling also suggests the two 2026 cash rate hikes to 4.1% have already reduced maximum borrowing capacity by roughly $25,000 for a single average‑income borrower and about $49,000 for a dual‑income couple, with any further rate increases likely to bite even harder. That leaves many new buyers with less room to stretch, even in markets where listing prices have started to slip.
Conisbee notes that higher and more volatile construction costs are reducing the feasibility of new developments, leading to delays, downsizing, or cancellations of projects just as population growth and limited existing stock keep demand elevated.
While monthly price growth has slowed, annual gains remain strong in many markets, with Perth and Darwin still leading and Brisbane, Adelaide and key regional areas holding in double‑digit territory.
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