That’s the paradox facing Australia’s property market today.

According to recent housing affordability data, affordability has deteriorated to its weakest level in more than three decades, despite declining property values. The key reason is that higher interest rates are having a greater impact on mortgage repayments than lower house prices are helping them. Inflation remains above the Reserve Bank’s target range, with headline inflation at 3.5% and underlying inflation also elevated, leading many economists to expect further rate increases.

Key Takeaways

•  House prices have fallen, but affordability has not improved.
•  Higher mortgage rates are outweighing the benefit of lower property values.
•  The RBA meets next week, with many economists expecting a further rate increase.
•  Borrowing capacity continues to be a major constraint for first-home buyers.
•  Housing supply remains constrained while demand pressures persist.

Anthony is interviewed on Ausbiz. Click here to watch.