Despite widespread hopes for interest rate cuts, Australia’s inflation continues to climb, reaching 3.8% in October. The ongoing cost-of-living crisis, driven by soaring housing, electricity, and rent costs, is pushing potential mortgage relief further into the future—possibly as far out as 2027.
📉 Why Rates Aren’t Falling Anytime Soon
According to CBA’s Matt Comyn, the Reserve Bank of Australia (RBA) won’t consider easing rates until inflation drops well below the 3% threshold—and stays there. RBA Governor Michele Bullock faces a tough balancing act: she’d prefer to stimulate sluggish growth but is cornered by inflationary pressures, particularly from rents and electricity.
With the end of energy bill subsidies looming, households may soon face even higher utility bills. And while wage growth is softening, everyday essentials—from food to education—continue to rise.
⚠️ Economists Warn: Don’t Bet on Cuts Yet
Market experts remain divided. NAB predicts rates could rise again in early 2026 if economic growth or labour markets tighten. Betashares and Westpac are more optimistic, tipping rate cuts in May—if inflation data softens.
KPMG suggests a minor rate cut could help stimulate the sluggish economy, while others warn government spending is both sustaining demand and contributing to inflation. Public wage growth and infrastructure spending remain contentious issues in the inflation debate.
💰 Housing Affordability Hits Record Low
Cotality reports that the median Australian home now costs 8.2 times the median household income—the worst affordability on record. Renters are also under pressure, with one-third of household income now required for rent. Sydney remains the least affordable, with a dwelling-to-income ratio of 10:1.
It now takes 11 years to save a standard 20% deposit, though the federal government’s 5% Deposit Scheme has provided some relief. Still, construction delays, high costs, and persistent demand mean new housing supply remains well below what’s needed.
📈 But 2026 Could Spark Double-Digit Growth
Looking ahead, SQM Research forecasts a price surge from mid-2026. Once rate cuts begin—potentially as early as May—national home values could rise 6–10%. Key cities expected to lead the charge include:
- Perth & Darwin: +12–16%
- Brisbane & Adelaide: +10–15%
- Sydney & Melbourne: +3–7%
Even under sluggish economic conditions, cities with tight housing supply and ongoing demand are expected to outperform. Rodney McLoughlin highlights that timing will be everything—those ready to enter or adjust their position in the market could stand to benefit significantly as momentum returns.
📝 Final Thoughts
While Australians face ongoing financial pressures and housing challenges, the outlook for 2026 is optimistic—if inflation subsides. For buyers, it’s a waiting game; for investors, preparation is key. Strategic decisions today could position you for success tomorrow.
Real Estate Newsletter
This article is a curated summary of various news stories from the past week, offering insights and updates on the real estate market. 28 November 2025.
Rodney McLoughlin is a trusted real estate professional with deep insights into the Australian property market. For personalized advice and market expertise, reach out to Rodney today.
