Despite a dip in house prices, Grace finds her journey to purchasing her first home riddled with compromises.
At 29, Grace, who resides in Wollongong, along with her partner, ventured into the housing market earlier this year—just as property values started to decline.
“I was ready to begin my search right when the timing seemed perfect,” Grace shared in an interview with SBS News.
“We approached the process with open minds, uncertain of what was within our financial reach but hopeful as we heard about potential price drops due to tax adjustments.”
The couple aimed to buy a home in their beloved coastal city in New South Wales, but soon realized it was financially out of reach.
“We’re looking to buy south where prices are more within range,” she said.
She said it was a “compromise” on what they wanted.
While the slump has made the market more attractive, Grace said there are still major issues.
“While the first home buyer scheme makes it more accessible to purchase a home, massive mortgage repayments are still a huge barrier, so I’ll only buy somewhere where I can put down at least a 10 per cent deposit,” she said.
“Another barrier is definitely bidding against those with clearly more money than you from the bank of mum and dad”.
Borrowing power slashed
Money may be on the mind of many potential buyers, with new data reporting a significant drop in borrowing power since the start of 2026, thanks to the three consecutive Reserve Bank of Australia (RBA) interest rate hikes seen so far this year.
New data from Canstar reveals that an average income earner’s maximum borrowing capacity had fallen by an estimated $35,400 since January, while couples seeking to buy a property had theirs slashed by $70,700.
The February RBA interest rate hike dropped borrowing capacity by $12,200 for individuals and $24,400 for couples.
The March hike saw a drop of $11,800 and $23,600, and May’s $11,400 and $22,700.
The RBA is expected to hold the cash rate at its next meeting on Tuesday. However, if Australians are subject to another rate hike, borrowing power would drop to $46,300 per person and $92,500 per couple.
Canstar’s data insights director, Sally Tindall, said it’s a “classic case of one step forward and one step back” for prospective buyers.
“While falling property prices may look like a win for people trying to get into the market, higher interest rates are keeping borrowing budgets in a bind,” she said.
“The challenge for buyers is that a cheaper price tag doesn’t necessarily mean a more affordable home if your borrowing capacity has been cut at the same time.”
She said another interest rate increase will “tighten the screws even further”.
“Headline inflation might have made a somewhat unexpected drop in June, but core inflation is still sticky,” she said.
“The RBA might not hike on Tuesday, but it’s difficult to see it ruling out further hikes altogether.
Australia’s housing market has been experiencing a slump since June, and shows no signs of a plateau.
On Tuesday, NAB released its August Housing Monitor, which predicted that house prices across all major cities will continue to fall.
Melbourne and Sydney median property prices are sitting 5.3 per cent and 5.1 per cent below recent peaks, while Brisbane, Perth and Adelaide are 0.4 to 0.7 per cent lower.
NAB forecast that property prices across all capital cities could fall collectively by 5 per cent across 2026.
Sydney alone is expected to experience a total drop of up to 10 per cent — with the median house price in Sydney estimated at $1,452,024 by December, dropping $160,000 over the year.
Brisbane prices could drop $28,380 by December and Perth and Adelaide by $17,200 and $30,754 respectively.
By December, the cheapest capital city to buy a property in will be Hobart, at $807,260.
NAB also predicted the market will make a small “recovery” in late 2027.
“NAB’s latest revised forecast points to further softening in property prices through to the end of the year, not just in Sydney and Melbourne but in other capitals that were previously defying the rate hikes,” said Tindall.
She said it’s a “tough pill to swallow” for homeowners who purchased their home during the peak with “next to no buffer”.
“Negative equity is a very real prospect for these borrowers. The key is to run your own race,” Tindall said.
“As a potential new buyer, make sure you have plenty in the tank in case of tougher times ahead. Existing borrowers should prepare for another hike, even if the headlines are suggesting we’re already at the peak.
“Certainly, the RBA has not declared the battle with inflation won and done.”