Housing affordability improved for the first time in months, but the relief is unlikely to last, according to the Housing Industry Association’s latest report, with new figures from some of the country’s biggest developers showing buyer demand for new homes sliding sharply.
HIA’s Affordability Index rose 3.6 per cent in the September quarter 2026, reflecting gains across most capital city and regional markets.
Despite the quarterly improvement, affordability remains 5.4 per cent worse than a year ago and close to the least affordable level on record. A household still needs 1.8 average incomes, in both the capitals and the regions, to comfortably service a mortgage on a median priced dwelling, compared to a single income for what would be considered an affordable home.
Tom Devitt, HIA’s senior economist, said the underlying problem had not changed.
“The fundamental problem remains unchanged. Australia is not building enough homes to meet the housing needs of its growing population,” Tom said.
Brisbane led the quarterly improvement, up 5.6 per cent, followed by Perth (+5.2 per cent) and Sydney (+4.9 per cent). Only four markets deteriorated over the quarter: regional Northern Territory (-3.0 per cent), regional South Australia (-1.5 per cent), Darwin (-0.7 per cent) and regional Tasmania (-0.4 per cent).
Over the full year, however, only Melbourne (+2.1 per cent) and Sydney (+1.2 per cent) recorded improved affordability, while regional Western Australia (-15.3 per cent), regional Tasmania (-14.6 per cent), Darwin (-13.1 per cent), Perth (-12.5 per cent) and regional South Australia (-12.4 per cent) led the annual declines.
Tom said the improvement would not hold once confidence returns.
“Once confidence returns to the market, these fundamentals will see dwelling prices head back upwards and affordability deteriorate all over again, especially if prices recover while interest rates are still going up,” he said.
Separately, new figures from major residential developers suggest supply-side pressure is already building. Mirvac sold 429 homes in the three months to 30 September, down from 619 a year earlier, a fall of almost a third, according to Australian Financial Review figures cited by the Real Estate Institute of Queensland.
Stockland recorded 1,506 net residential lot sales in its September quarter, down from 2,117 a year earlier, with buyer inquiries also falling, per The Urban Developer.
Antonia Mercorella, REIQ’s chief executive officer, said the figures were an early warning sign.
“We were finally starting to see some momentum building behind new housing supply, and now we’re seeing it rapidly lose steam,” Antonia said.
“When some of Australia’s biggest residential developers are reporting sharp falls in sales and buyer inquiries, we need to take notice. Today’s weaker demand risks becoming tomorrow’s housing shortage.”
ABS figures show new dwelling loan commitments fell 5.4 per cent nationally in the June quarter, with investor loans down 8.6 per cent and Queensland investor lending down 10.1 per cent. The total value of Australia’s residential dwelling stock fell by $34.1 billion over the quarter, while the national mean dwelling price declined by $8,200.
Antonia pointed to the federal government’s plan to retain negative gearing for new builds for investors as a risk to supply.
“Trying to steer investors towards one segment of the market while making investing in established property less attractive, assumes investors will simply go where government wants them to go. In reality, some may choose not to invest in housing at all,” she said.
“A sustained contraction in new housing would have significant consequences on meeting supply targets and could create affordability issues for buyers and tenants.”