Tuesday’s rate pause may have come as a relief to many, but home buyers 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 reveals the gap between the pace of WA’s house price growth and that in the eastern states has widened to a chasm, with Perth values rising to 25.8 per cent over the past year compared to Melbourne’s 0.5 per cent.
Melbourne’s dwelling values declined by 0.8 per cent in May, Sydney’s fell by 0.9 per cent, while Perth dwelling values were up by 1.5 per cent in the same period, to remain at a record high.
According to Cotality’s Monthly Housing Chart Pack, an annual household income of $123,787 was needed to afford the mortgage on a median house in Perth, up from $107,329 in January.
Those looking to units for a cheaper option still needed an income of $86,740, up from $74,223 in January.
This makes Perth the third-most expensive capital to afford a home in, behind Sydney and Brisbane, where the incomes required to service the mortgage on a median house rose to $178,194 and $139,077, respectively.
Gerard Burg, Cotality’s head of research, said Perth buyers were facing an “aggressive income barrier”, even for cheaper homes.
“Rate hikes have significantly increased the challenges of servicing a mortgage across Australia,” he said.
“In expanding markets like Brisbane and Perth, the compounding effect of rising property values and higher interest rates creates an aggressive income barrier for buyers, even at the lower end of the spectrum.”
For buyers searching below the median, the lower quartile of Perth’s housing market offered little relief, with an income of $104,534 still needed for a home – a $14,400 jump from January – and $73,431 for a unit, up from $62,130 in January.
While Perth remains the strongest market for home values, the report said the city had “noticeably lost momentum”.
The move in May’s federal budget to limit negative gearing tax concessions to new builds was hoped to take some of the heat out of markets such as Perth, which saw an influx of investors as prices shot up in Melbourne and Sydney post-pandemic.
However, Perth property expert James Limnios said recent Australian Bureau of Statistics data showed the market was already starting to rebalance naturally before it was “spooked” by Labor’s tax changes.
Limnios pointed to property transfer figures during the March quarter that revealed a slowdown in Perth, which he said showed the market was already responding to rising interest rates and cost-of-living pressures.
“In Perth, housing transfer fell to 5223 for the March quarter 2026 compared to 6724 for the previous quarter,” he said.
“However, in the eastern states’ capital cities, the fall was much more dramatic, with Sydney house transactions falling from 14,780 to 8993 and Melbourne from 19,065 to 11,233 during the same period.
“Overall, the fall in transfers was the result of the market responding to housing affordability issues, which eventually would have led to a gradual correction in house prices.”
Limnios, the managing director of Limnios Property Group, said the government’s “sledgehammer” approach may 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 greater debt than they were worth.
“Government intervention in the property market has too often led to distortions that can lead to unnecessary boom-bust 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 severe supply shortage in housing.
“However, the steady increase in established price listings means that sellers need to be more price conscious when setting the selling price of their home.
“Listing a house for sale and selling it within a few days is now a fast-fading memory.”
