The salary people need to earn to afford a mortgage compared to January
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, published on Thursday, reveals the gap between WA’s house price growth rate and growth in the eastern states has widened into a chasm, with Perth values rising 25.8 per cent last year compared to 0.5 per cent in Melbourne.
While Melbourne’s house values fell by 0.8 percent in May, Sydney’s house values fell by 0.9 percent, Perth’s house values continued to remain at a record level, increasing by 1.5 percent in the same period.
According to Cotality Monthly Housing Table PackageAnnual household income needed to be $123,787 to pay the mortgage on the average house in Perth, which was $107,329 in January.
Those looking for a cheaper option still needed an income of $86,740, compared to $74,223 in January.
This makes Perth the third most expensive capital city, behind Sydney and Brisbane, where the income needed to pay the mortgage on an average home rises to $178,194 and $139,077 respectively.
Gerard Burg, Cotality’s head of research, said buyers in Perth faced an “aggressive income barrier” for even cheaper homes.
“Rate increases have significantly increased the difficulty of paying mortgages across Australia,” he said.
“In expanding markets like Brisbane and Perth, the combined effect of rising property values and higher interest rates creates an aggressive income barrier even for buyers at the lower end of the spectrum.”
For buyers searching below average, the bottom quartile of the Perth housing market provided little relief; a home still needed $104,534 (up $14,400 from January) and the unit needed $73,431, up from $62,130 in January.
While Perth remains the strongest market for home values, the report said the city has “visibly lost momentum”.
A move in the federal budget in May to limit negative tax breaks to new construction was hoped to dampen some of the excitement in markets such as Perth, which have been flooded with investors as prices soared in Melbourne and Sydney in the wake of the pandemic.
But Perth property expert James Limnios said the latest data from the Australian Bureau of Statistics showed the market was already starting to rebalance naturally before being “spooked” by Labor’s tax changes.
Limnios pointed out that property transfer figures in the March quarter revealed a slowdown in Perth, saying this showed the market was already responding to rising interest rates and cost of living pressures.
“Housing transfers in Perth fell to 5223 in the March quarter 2026 compared to 6724 in the previous quarter,” it said.
“But in the eastern state capitals the decline has been much more dramatic, with home transactions in Sydney falling from 14,780 to 8,993 and Melbourne from 19,065 to 11,233 over the same period.
“Overall, the decline in transfers was a result of the market responding to housing affordability issues, which would eventually lead to a gradual correction in house prices.”
Limnios, managing director of Limnios Property Group, said the government’s “sledgehammer” approach could distort the market to the detriment of young people in the future.
He also expressed the possibility that those who buy using the 5 percent deposit program in cities such as Sydney may end up owning a home with more debt than it is worth.
“Government intervention in the real estate market has often led to distortions that can lead to unnecessary boom and bust cycles,” Limnios said.
“In Perth, federal tax changes have had an impact on the residential market, but it is not as pronounced as in the eastern states as the Western Australian economy remains very strong and there continues to be a severe shortage of housing.
“But the steady increase in established price lists means sellers need to be more price conscious when determining the selling price of their home.
“Listing a house for sale and selling it within a few days is now a quickly fading memory.”
