Loan sizes and rents continue to climb as market heads into 2026
Housing affordability in Western Australia improved slightly in the September 2025 quarter, even as rising prices and larger mortgages continued to weigh on households.
According to the Real Estate Institute of Australia (REIA)’s latest Housing Affordability Report, the share of family income needed to service average home loan repayments in Western Australia eased to 40.5% over the quarter. This marked a quarterly fall of 0.5 percentage points, although the figure was still 0.6 percentage points higher than a year earlier.
Suzanne Brown, president of the Real Estate Institute of Western Australia (REIWA), linked the short-term improvement to monetary policy settings. “The Reserve Bank of Australia’s decision in August to lower the official cash rate target to 3.6% helped reduce borrowing costs, and that is reflected in the slight improvement in affordability in Western Australia in the September quarter,” she said.
Over a longer horizon, however, affordability has moved in the opposite direction in the state.
“Australia’s housing affordability has increased by 1.6 percentage points over the year, but this is not true in Western Australia where there has been a decline in affordability over the 12 months to the end of the September quarter,” Brown (pictured right) noted. “This is due to the strong upward price movement of properties.
“As prices rise, people have to borrow more to buy a home and a greater proportion of family income is required to make mortgage repayments.
“Price growth remains very strong in the Western Australian market, and with the December meeting of the Reserve bank keeping interest rates on hold, we expect affordability to be further challenged as we move into 2026.”
Despite this deterioration, Western Australia remained among the more affordable jurisdictions nationally, with only Tasmania and the two territories requiring a smaller share of income for home purchase.
Larger loans, fewer owner-occupier commitments
House price growth over the year translated into larger mortgage balances for Western Australian borrowers.
The average home loan in the state rose to $632,901 in the September quarter, up 2.2% on the previous three months and 13.5% higher than a year earlier. Among all states and territories, Western Australia recorded the strongest annual growth in average loan size for both first home buyers (10%) and all owner-occupier borrowers (13.5%).
New lending activity softened over the same period. The total number of new owner-occupier loan commitments in Western Australia fell to 9,796 in the September quarter, a decline of 6.9% over the quarter and 3.2% compared with the previous year.
First-home buyer volumes also eased. The number of loans to this segment dropped to 3,436, down 6.1% on the quarter and 7.7% over the year. Brown said the data did not yet capture the impact of recent policy changes that could influence activity among new entrants to the market.
“These are September quarter figures and pre-date the changes to the Australian Government 5% Deposit Scheme,” she said. “The scheme has increased the pool of qualified first home buyers and REIWA agents report there is strong activity in this sector of the market as we approach the end of the year.”
Rental affordability under further strain
Rental households in Western Australia faced increased pressure in the September quarter. The proportion of family income needed to cover median rent in the state rose to 24.2%, up 0.2 percentage points over the quarter and 0.5 percentage points over the year.
Brown noted that rent growth had slowed, even as weekly rents remained elevated. “After years of very strong growth, rent price growth is slowing,” she said, with median rents in Perth sitting at about $700 per week.
At the national level, rental affordability was unchanged over the quarter, with 24.3% of income required to meet the median rent. This represented an improvement of 0.5 percentage points over the year.
Rental affordability declined in Queensland, Tasmania, the Northern Territory and Western Australia, underlining ongoing supply and demand challenges across several regions.
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