Fresh blow to first-home buyers as house prices hit record high

Australia’s housing market reached a new record high last financial year, adding further pressure to would-be buyers.

Australian house prices are tipped to rise on the back of interest-rate cuts, putting further pressure on those trying to get into the market.

National home prices rose 0.4 per cent in June and are now up 4.6 per cent on this time last year, PropTrack figure show.

House prices were up in every market in June, with national house prices on average sitting $40,900 higher than a year prior.

This means first-home buyers trying to save a 20 per cent deposit need to save an extra $8180.

Aussies are taking out bigger loans on the back of RBA rate cuts. Picture: NewsWire / Andrew Henshaw

More rate cuts are likely to drive house prices even higher.

AMP chief economist Shane Oliver said the Reserve Bank of Australia was likely to cut interest rates by 25 basis points in July, August, November and February 2026, taking the cash rate to 2.85 per cent by early next year and adding to affordability constraints.

“Rate cuts are normally positive for home prices, as they boost how much buyers can borrow and hence pay for a property, although sometimes this can show up after a lag following several cuts depending on economic conditions,” he wrote in an economic note.

“Roughly speaking, each 0.25 per cent cut in variable mortgage rates will add about $9000 to how much a buyer on average earnings can borrow.”

Dr Oliver said the RBA began its rate-cutting cycle in February, with five of the last seven cycles leading to higher house prices in the following 18 months

But he said this time might be different, as affordability constraints and pressures from US President Donald Trump’s tariffs slow down economic activity.

AMP shows the impact rate cuts have on house prices: Picture, supplied

REA group senior economist and report author Eleanor Creagh agrees.

“Market momentum is building amid renewed buyer confidence and improved sentiment, buoyed by falling interest rates and expectations of another rate cut in July,” she said.

“However, the upturn remains measured as affordability constraints keep the pace of growth in check.”

Ms Creagh conceded further house price growth was likely on the back of rate cuts.

“Further interest-rate cuts expected later this year will ease borrowing costs, adding to the

momentum in housing demand and reinforcing recent price growth,” she said.

House prices are on the rise, led by the capital cities. Picture: NewsWire / Flavio Brancaleone

This was led by capital city growth, with Adelaide posting the strongest monthly rise of 0.6 per cent for the month, extending its streak of outperformance and retaining its title as the strongest performing capital city over the past year (up 9.8 per cent).

Sydney and Hobart were both up 0.5 per cent for the month of June, while Melbourne was up 0.3 per cent, although prices were still 1.1 per cent lower than the city’s record high.

The rise in house prices comes off the back of another interest rate cut in May, the second in the RBA’s rate-cutting cycle.

Would-be homebuyers are also factoring further interest rate cuts, with varying forecasts suggesting another three or four rate reductions are coming by early 2026.

REA research follows the Reserve Bank governor Michele Bullock being questioned about house prices following the board’s May rate-cut decision.

Reserve Bank governor Michele Bullock says there needs to be more supply to help with rising house prices. Picture: NewsWire / Nikki Short

“If the right thing to do in terms of employment and inflation is to lower interest rates, I think we have to accept what that might imply for housing prices because, as I said earlier, the issue for housing is supply and demand,” she said.

Ms Bullock shifted the blame from interest rates to government policy.

“I guess my personal reflection is that there’s nothing the Reserve Bank can do about these affordability issues of housing,” she said.

“This is an issue of housing demand and housing supply, and increasingly this issue is finding its way into the governments, both state and federal governments, and that’s where the focus has to be.”

The RBA will make its next interest rate decision on July 7-8 when it is widely predicted to reduce interest rates further.

Originally published as Fresh blow to first-home buyers as house prices hit record high