Housing Affordability in Australia (2026): What It Really Means — And Why the Market Is Under Pressure
- Lina Zheng
- 3 days ago
- 4 min read
Housing affordability is one of the most talked-about topics in Australian property — yet it’s also one of the most misunderstood.
Prices, interest rates, government schemes, and supply shortages are often discussed in isolation. But affordability is not just about how much homes cost. It’s about how housing costs compare to real household incomes, and how that relationship is changing over time.
As Australia moves into 2026, the affordability challenge is intensifying — especially for first home buyers and renters — and it is now shaping buyer behaviour, investor activity, and development outcomes across the country.
This article breaks down:
What housing affordability actually means
Why traditional measures are no longer enough
How affordability pressures are playing out in real markets
Why first home buyers and investors are increasingly competing
What this means for developers, homeowners, and policymakers
What Is Housing Affordability?
At its core, housing affordability measures the relationship between housing costs and household income.
Most economists and planners use three broad methods:
1. Price-to-Income (or Rent-to-Income) Ratios
This compares the median house price or rent to the median household income.
Below 4× income → very affordable
4×–6× income → affordable
6×–8× income → unaffordable
Above 8× income → severely unaffordable
Despite its simplicity, this method clearly shows the barrier to entry — whether someone is trying to buy or rent.
2. Repayment or Rent Burden
This measures how much of a household’s income is spent on housing costs.
For renters, the common benchmark is:
Under 20% → very affordable
20–30% → affordable but tightening
30–40% → unaffordable
Over 40% → severe rental stress
3. Residual Income Tests
This looks at how much income remains after housing costs and living expenses are paid.
While detailed, this method is harder to apply consistently across markets.
👉 In practice, price-to-income and rent-to-income ratios remain the clearest indicators of structural affordability stress — particularly for first home buyers and renters.
Why Old Affordability Benchmarks No Longer Work
For years, the Demographia model defined affordability as homes costing no more than three times household income.
That benchmark was set in a very different era:
Single-income households
Strict lending rules
Limited household debt
Lower housing expectations
Today’s reality is different:
Dual incomes are common
Credit is more accessible
Government support schemes exist
Households stretch further — often painfully
This doesn’t mean housing is affordable.
It means households are absorbing more financial stress to participate.
Brisbane as a Case Study in Housing Affordability
The affordability challenge is clearly illustrated in Brisbane, particularly within the Brisbane City Council area.
Income vs Property Prices
Median household income: ~$216,700 per year
Wages and salaries: ~$131,000 (about 60% of total income)
Since 2015:
Household incomes ↑ ~4%
Detached house prices ↑ ~125%
Apartments/townhouses ↑ ~64%
This widening gap is the core affordability problem.
Buying Affordability
Detached houses now exceed 6× gross household income → unaffordable
Units and townhouses remain relatively more accessible — but are trending the same way
Younger households relying mainly on wages are increasingly priced out of houses altogether
Rental Affordability
Four-bedroom houses now absorb close to 30% of household income
Two-bedroom apartments are no longer “very affordable”
Key workers are being pushed further from employment centres
Why First Home Buyers and Investors Will Compete in 2026
Affordability pressure is now colliding with high investor activity.
In 2026:
Investors account for ~40% of mortgage demand
First home buyers account for ~20%
Entry-level properties are the main battleground
Investors typically have:
Higher borrowing capacity
Existing equity
Stronger cash buffers
This is why first home buyers are increasingly going head-to-head with investors at auctions — often unsuccessfully.
Government schemes like the 5% Deposit Scheme and Help to Buy can help buyers enter earlier, but they also:
Pull demand forward
Increase competition
Apply upward pressure on prices
The result?
Affordability improves briefly — then deteriorates again.
Interest Rates, Prices, and the 2026 Outlook
Despite interest rate uncertainty, property prices are still forecast to rise in 2026.
National forecasts suggest:
6–8% price growth nationally
Stronger growth in Perth and Brisbane
More subdued growth in Sydney and Melbourne
The key driver is not rates — it’s supply.
Australia is simply not building enough housing to match:
Population growth
Migration
Household formation
Without structural supply reform, affordability pressure remains.
Why This Is a Structural Problem — Not a Market Cycle
Housing affordability is no longer a short-term issue caused by interest rates or sentiment.
It is a structural imbalance between:
Income growth
Housing supply
Housing diversity
Planning constraints
Key workers — including healthcare, education, emergency services, and essential trades — are increasingly unable to live near where they work.
This has consequences beyond housing:
Labour shortages
Reduced productivity
Pressure on infrastructure
Declining liveability
As one industry expert put it:
“It’s hard to run a hospital from the hinterland.”
What Needs to Change to Improve Housing Affordability
Affordability will not improve through price corrections alone.
What’s needed is viable, well-located supply, including:
Townhouses
Small-lot homes
Terraces
Secondary dwellings
Targeted reforms can help:
Reduced setbacks and parking minimums
More flexible zoning
Construction innovation
At OwnerDeveloper, this is exactly why we focus on feasibility-led development — ensuring projects are:
Financially realistic
Market-aligned
Buildable under real planning controls
Sustainable for buyers and investors
Final Thoughts: Affordability Is About Alignment
Housing affordability is not just about prices falling or rates changing.
It’s about aligning:
What people earn
What housing costs
What gets approved
What gets built
In 2026, the winners in property will not be those chasing hype or “hot suburbs”.
They will be the ones who:
Understand their numbers
Assess real repayment capacity
Build buffers
Choose the right product for the right market
Thinking About Developing or Buying in 2026?
If you want clarity on:
What is actually affordable for you
Whether your site stacks up
What type of development makes sense in today’s market
We help homeowners, investors, and developers cut through noise — and make decisions based on feasibility, not headlines.
