Prices fell for five months. You can afford less than before.
The Weekly Read · 7 September 2026
Australian home values fell in every month from April to August 2026, but the share of homes a median-income household could afford went from 43% to 12%. Prices came down, so why did fewer homes come within reach?
1. Prices really did fall
Cotality, formerly CoreLogic, released its monthly figures on 1 September. National dwelling values fell 0.9% in August, and are down 3.6% from the March peak. That is five monthly falls in a row.
Sydney fell 1.4% in August, Brisbane 1.0%. Sydney sits 7.1% below its February high, the widest gap of any capital. Darwin is the only capital that has avoided a fall over the past three months.
The falls are widespread. Cotality led its release with 93% of capital city suburbs recording a value fall over the three months from June to August. Cotality wrote, what began as a concentrated easing across higher-value segments has become a much more generalised softening.
2. But fewer homes came within reach
The Housing Affordability Report 2026, published by realestate.com.au on 5th September, reported in the 2026 financial year a median-income household, on about $125,000 a year, could afford 12% of the homes sold. The report calls it the lowest on record. The previous low was 14%, in the 2008 financial year. In the 2021 financial year, with mortgage rates at record lows, the same household could afford 43%.
It is worth being precise about what those two numbers count.
The denominator is the homes that actually sold. Not the national housing stock. Only dwellings that changed hands during that financial year enter the calculation.
The calculation runs in four steps. Take 30% of gross household income as the repayment ceiling. Work out the loan that repayment supports, at the average rate on new owner-occupier variable loans at financial year end plus a 2.5 percentage point buffer, which is headroom to test whether the household could still pay if rates rose further. Add a 20% deposit for the highest price that household can reach. Then count the share of homes sold below it.
So the measure does not ask whether a household can buy. It assumes the 20% deposit is already saved, and asks whether the repayments are manageable once it exists. Households still saving never enter the calculation. Read 12% as the optimistic side.
And falling prices can still push the number down. When rates rise, the same repayment supports a smaller loan, so the highest price that household can reach comes down with it. If that line falls faster than prices do, fewer homes are left underneath it.
The report measured the burden a second way. Mortgage repayments took 35.5% of average household income in the 2026 financial year, well above the 33.3% reached during the global financial crisis and the highest share since 1989, when it was 37.5%.
It also cut the numbers by income band. The top 20% of earners in the 2026 financial year could afford the same share of homes as a median-income household could in the 1997 financial year. Further down: a household on $76,000, the 30th percentile of income, could afford 2%. On $65,000, 1%.
Every state went backwards. South Australia is now the toughest, with Queensland third. Queensland fell from 15% in the 2025 financial year to 9% in 2026. Saving a deposit there now takes 6.7 years, the longest in Queensland's own record; the longest anywhere in the country is South Australia, at 7.4 years. Western Australia had the steepest one-year fall.
Put 6.7 years beside the 20% deposit assumption and the character of the measure is clear. The 12% describes the moment the deposit is finally saved. In Queensland, reaching that moment takes 6.7 years.
3. Interest rates sit in between
The report names borrowing costs as the largest drag on affordability over the year.
The Reserve Bank raised the cash rate three times in 2026: February, March and May, 0.25 percentage points each, 0.75 in total. It stands at 4.35%.
What households actually pay is the mortgage rate. On the report's figures it rose from a low of 5.8% in the 2025 financial year to 6.3% by the end of the 2026 financial year, after those three increases.
Two more numbers fill in the rest. Between the 2025 and 2026 financial years the median home price rose just over 5%, and household incomes rose about 4.5%. Income growth worked in favour of affordability, the report says, but was slower than in recent years and was not enough. Prices outran incomes, and rates sat on top.
The next decision is on the 29th September.
Bank (published) | Next rise | Level |
NAB (27 August 2026) | September meeting | 4.60% |
CBA (27 August 2026) | November meeting, with September named as a secondary risk | 4.60% |
Both land on 4.60%. They disagree on when.
Belinda Allen, who heads Australian economics at CBA, put November down to July inflation coming in broadly higher than expected, and said the data available before the September meeting would not be enough.
The Australian Bureau of Statistics released its monthly consumer price index indicator for July on 26 August. Headline inflation ran at 3.5% over the year, down from 3.8% in June. The trimmed mean, which strips out the most volatile items, held at 3.6%, unchanged from June. The Reserve Bank's target band is 2% to 3%.
How to read it
The report set out why the two trends diverged. Over the past 12 months the strongest price growth was at the most affordable end of the market. The expanded 5% Deposit Scheme, which lets eligible first home buyers purchase with a 5% deposit, brought demand forward, and more investors came in at the same time, sharpening competition there. Recent price weakness, the report says, has been concentrated in the middle and higher price tiers.
That sits alongside Cotality's 93% without contradicting it. The 93% counts suburbs where values fell. The report's tiers count price brackets where values fell. The bracket that has come down and the bracket most people are buying in are not the same bracket.
Three assumptions are worth re-checking before a purchase decision.
The unit the fall is measured in. The 3.6% headline treats the whole country as one number, and price brackets inside it moved by different amounts. Cities split the same way. The question isn't whether the market is cheap. It's whether prices have fallen in the bracket you are buying in.
Borrowing capacity. Price sets only half of the entry point. What the same income can borrow sets the other half, which is what the report meant in naming borrowing costs the year's biggest drag.
The deposit. The 12% is calculated for households that already hold a 20% deposit. For a household still saving, it describes a ceiling that opens on the day the deposit is complete.
The report offers one conditional improvement: if price weakness continues, affordability may improve slightly. The caveat: without more new supply, it does not get solved.
News that prices have fallen is, for now, a story about the middle and higher tiers. The most affordable tier rose the most over the past 12 months, and the recent softening has largely gone around it. The same headline is an opening for one buyer and still someone else's news for another.
A national number will not tell you which one you are. That is why we re-score the eight South East Queensland councils on the same measures every month.
Sources
Dwelling values: Cotality public release, "Housing downturn spreads as 93% of capital city suburbs record winter value falls", 1 September 2026
Affordability figures and methodology: realestate.com.au, Housing Affordability Report 2026, released 5 September 2026 (written by Angus Moore, Senior Economist; data sources listed as realestate.com.au, Australian Bureau of Statistics and Reserve Bank of Australia)
Cash rate history, current level and meeting dates: Reserve Bank of Australia board meeting schedule, and the May 2026 Statement on Monetary Policy
Inflation: Australian Bureau of Statistics monthly consumer price index indicator for July, released 26 August 2026
Bank forecasts: NAB Economics (27 August 2026); CBA newsroom (27 August 2026, Belinda Allen)
General information only, not tax, legal or financial advice. Nothing here is financial product advice or a recommendation about any purchase or buying structure. Confirm your own position with your accountant, mortgage broker or licensed financial adviser before acting.
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