Home Prices Soar to Record Highs as Expert Warns of Persistent Affordability Issues
The landscape of Australian housing affordability is growing increasingly concerning. Recent data indicates that home prices are reaching unprecedented heights, with experts warning of ongoing affordability challenges. In January 2026, the PropTrack Home Price Index revealed the national median home price had surged to $1.157 million, marking an 8.4% increase compared to the previous year.
Housing Affordability Index Trends
The PropTrack Housing Affordability Index (HAI), launched in 2023, initially highlighted the worst housing affordability levels recorded in major Australian cities, excluding Brisbane. However, in its second year, 2024, affordability worsened further as Brisbane also experienced significant declines.
In 2025, there was a slight improvement in affordability, largely attributed to three interest rate cuts by the Reserve Bank of Australia (RBA). Yet, recent trends indicate that this improvement may be temporary, as home prices have rebounded strongly.
Current Market Dynamics
According to Angus Moore, REA Group’s executive manager of economics, median home values in Australia increased by $110,200 since January 2025. This increase is compounded by a potential interest rate hike set for February, which may add financial strain to potential homebuyers.
- Current median home price: $1.157 million
- Price increase since January 2025: $110,200
- Year-over-year price rise: 8.4%
Inflation and Building Costs
Housing has significantly contributed to rising inflation, with year-over-year increases of 5.5% as of December 2025. Newly built homes also saw price increases of 2.3% compared to the previous year, with estimates indicating that construction costs are now 47% higher than before the pandemic.
Shane Garrett, chief economist at Master Builders Australia, noted that the recent rise in construction material costs, along with persistent labor shortages, is exacerbating affordability issues.
Future Outlook
As affordability continues to decline, the prospect of an interest rate hike will likely further strain household budgets. Despite some wage growth, it has not kept pace with surging property prices. Moore added that homeowners should expect continued challenges, as rising rates and prices hinder improvements in affordability.
- Inflation increase: 5.5% in December 2025
- Construction costs up: 47% since before the pandemic
In summary, the current state of the Australian housing market paints a bleak picture for affordability, with prices soaring and economic conditions suggesting a continued downward trend. The ‘Aussie dream’ of homeownership is fading for many, and without significant policy changes, the future looks challenging.
