Australian couples earning two average wages could lose an estimated $92,500 in borrowing power after four rate rises, even as home prices fall.
Falling home prices should be good news for buyers, but a brutal borrowing-power squeeze means many could still be worse off. See the cities facing the biggest falls.
Australian couples each earning the average wage could have almost $100,000 wiped from their homebuying budgets this year, even as property prices fall by tens of thousands of dollars.
Canstar analysis shows three RBA rate rises this year have already cut the estimated maximum borrowing capacity of such a couple by $70,700.
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A fourth increase would take the reduction to $92,500 compared with the start of the year.
For a single buyer earning the average wage, the estimated hit has already reached $35,400 and would rise to $46,300 after another increase.
The figures come ahead of the RBA board’s next cash rate decision on Tuesday, with another rise threatening to further squeeze how much homebuyers can borrow.
It creates a cruel catch for would-be homeowners hoping falling property prices will make it easier to buy.
NAB’s latest forecasts indicate house prices could fall further between August and December in Sydney, Melbourne, Brisbane, Perth and Adelaide.
Canstar calculations using Cotality data show Sydney’s median house price could shed another $67,284 by the end of 2026, taking it to about $1.462m.
That would amount to a $162,447 fall across the full calendar year.
Melbourne’s median house price could lose another $30,748 by December to $905,780, taking its estimated full-year fall to $89,583.
Adelaide could lose another $30,754 from current levels, Brisbane $28,380 and Perth $17,200.
But Brisbane, Perth and Adelaide would still finish the year above where they started after price growth earlier in 2026.
Hobart was the exception among the capitals covered by the analysis, with its median house price forecast to rise another $2095 by the end of the year.
Canstar Data Insights director Sally Tindall. Picture: supplied. NSW real estate
Canstar.com.au data insights director Sally Tindall said falling prices did not automatically make homes more affordable.
“For would-be buyers, this is shaping up to be a classic case of one step forward, two steps back,” Ms Tindall said.
“The challenge for buyers is that a cheaper price tag doesn’t necessarily mean a more affordable home if your borrowing capacity has been cut at the same time.
“Another rate hike, should one eventuate this year, would tighten the screws even further.”
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Ms Tindall said recent buyers with little equity could also be exposed if NAB’s forecasts were realised.
“If NAB’s forecast plays out across house prices, estimates show a median-priced house in Sydney could fall by more than $160,000 over the 12 months to December this year,” she said.
“That’s a tough pill to swallow for homeowners who bought at the peak with next to no buffer. Negative equity is a very real prospect for these borrowers.”
Frame Finance director and mortgage broker Imogen Alexy said buyers were increasingly splitting into two camps as borrowing capacity fell.
“There’s a really big divide,” Ms Alexy said.
She said losing $70,000-$90,000 in borrowing power could mean staying in a preferred area but sacrificing a bedroom, outdoor space or overall home size, or moving further away to find something affordable.
“Either way, you have to be prepared to make a sacrifice,” she said.
Frame Finance director and principal broker Imogen Alexy – for Herald Sun Real Estate
Ms Alexy said some buyers who could comfortably afford their preferred type of property six months ago could no longer do so.
Others were delaying purchases in the hope prices would fall further, but another rate rise could leave them with less borrowing power despite having saved a larger deposit.
She said some people who spent another six to 12 months accumulating savings were returning to brokers to discover higher rates had effectively wiped out the benefit.
“All of those savings are essentially nullified and they’re back to square one,” Ms Alexy said.
“That’s a really tough conversation to have.”
Property Investment Professionals of Australia chair Cate Bakos said the research provided a crucial counter-narrative to the speculative behaviour often seen in the market.
Property Investment Professionals of Australia chair Cate Bakos said first-home buyers were not automatically better off simply because property values were falling.
“If borrowing capacity falls at a faster rate than house prices are falling, then obviously the outcome for a buyer is negative,” Ms Bakos said.
She said buyers with stronger incomes and enough serviceability to comfortably secure the loan they needed were better placed to take advantage of weaker prices.
Others could be pushed from houses into units or forced to search further from major cities as their budgets contracted.
Ms Bakos said recent low-deposit buyers should not necessarily panic about falling valuations if they planned to remain in their homes.
“Negative equity only bites if you crystallise a loss,” she said.
“If they’re making a decision to sell, then obviously that will be a blow for them, but it doesn’t really matter what your property’s worth if it’s just a value on paper and you’re staying put.”
A real estate For Sale sign on a property in East Toowoomba, house for sale, Thursday, December 21, 2017.
Despite the gloomy outlook, Ms Bakos warned buyers with the financial capacity to purchase against waiting indefinitely for prices to fall further.
“If you’ve got the capacity to buy a property that’s right for you now, standing back and adopting a wait-and-see approach is not what I’d recommend,” she said.
“We’re going to have a recovery and people will be sad that they’ve missed the boat.”
She said current conditions could favour purchasers, but only those financially capable of acting on them.
“It’s a buyer’s market, but you can only take advantage of it if you’ve got the capacity to move forward,” Ms Bakos said.
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