Tuesday’s rate freeze may be a relief for many, but homebuyers in Perth still need to earn $16,500 more than they did in January to afford a typical mortgage in the western capital.
New research from Cotality, released on Thursday, also shows the gap between WA’s house price growth rate and that in the eastern states has widened to a gap, with Perth rates rising to 25.8 per cent in the past year compared to Melbourne’s 0.5 per cent.
Melbourne home values fell 0.8 per cent in May, Sydney’s fell 0.9 per cent, while Perth home values rose 1.5 per cent over the period, remaining at a record high.
According to Cotality’s Monthly Housing Chart PackageAn annual household income of $123,787 was needed to afford a mortgage on the average home in Perth, up from $107,329 in January.
Those looking for affordable units still needed an income of $86,740, up from $74,223 in January.
This makes Perth the third most expensive capital city to afford a home, behind Sydney and Brisbane, where the income required to service a mortgage on the average home rose to $178,194 and $139,077, respectively.
Gerard Burg, head of research at Cotality, said Perth buyers were facing a “messy income barrier”, even for affordable homes.
“Rising rates have significantly increased the challenges of servicing mortgages across Australia,” he said.
“In expanding markets such as Brisbane and Perth, the compounding effect of rising property values and high interest rates creates an income barrier for buyers, even at the lower end of the spectrum.”
For buyers looking below the median, the bottom quarter of Perth’s housing market offered little relief, with an income of $104,534 still required for a house – a jump of $14,400 from January – and $73,431 for a unit, up from $62,130 in January.
While Perth remains the strongest market for house prices, the report said the city “lost momentum”.
A move in the government’s May budget to cap negative gearing tax deals for new builds was expected to take the heat out of markets such as Perth, which saw a wave of investors as prices rose in Melbourne and Sydney after the pandemic.
However, Perth property expert James Limnios said recent Australian Bureau of Statistics data showed the market was poised to begin a natural balance before being “contaminated” by Labor’s tax changes.
Limnios cited property transfer figures for the March quarter which revealed a decline in Perth, which he said showed the market was ready to deal with rising interest rates and cost of living pressures.
“In Perth, house transfers decreased to 5223 for the March 2026 quarter compared to 6724 for the previous quarter,” he said.
“However, in the capital cities of the eastern states, the fall was even greater, with housing transactions in Sydney falling from 14,780 to 8993 and Melbourne from 19,065 to 11,233 over the same period.
“Overall, the drop in displacement was due to the market responding to housing affordability issues, which would eventually lead to a gradual correction in house prices.”
Limnios, managing director of Limnios Property Group, said the government’s “hammer” approach could distort the market to the future detriment of young people.
He also raised the prospect of those who bought using the 5 per cent deposit scheme in cities such as Sydney owning homes with more debt than they were worth.
“Government intervention in the property market has often led to distortions that can lead to unnecessary cycles,” Limnios said.
“In Perth, the federal tax changes have had an impact on the established market but not as pronounced as in the eastern states, as the Western Australian economy remains very strong, and there continues to be a significant supply shortage in housing.
“However, the rapid increase in fixed price listings means that sellers need to be more price conscious when setting the selling price of their home.
“Listing a home for sale and selling it within days is now a fast fading memory.”
