Australia's property market posted a 2.1% gain in the first quarter of 2026, according to new data from Cotality. On the surface, that sounds like good news. But if you're a buyer trying to get a loan approved right now, the picture is more complicated than that headline suggests.
Growth is slowing. Conditions are uneven. And for many buyers, the real challenge isn't finding a property, it's figuring out how much they can actually borrow.
A market pulling in two directions
Perth is the standout story of this quarter. Home values there surged 7.3% in just three months, adding roughly $69,000 to the median dwelling value, according to Cotality's Research Director Tim Lawless. That kind of growth is being driven by extremely tight supply; advertised stock in Perth is sitting around 40% below its five-year average.
But in Sydney and Melbourne, the story is very different. Sydney values have slipped 0.4% since late November 2025, and Melbourne is down 0.9% from its peak. Auction clearance rates are softening, and more properties are sitting on the market longer. Buyers in those two cities have more negotiating room than they've had in a while.
This two-speed market is a direct result of affordability hitting a ceiling. In Sydney and Melbourne especially, prices have climbed to the point where many borrowers simply can't qualify for enough to compete at the top end. As Cotality notes, wages aren't keeping pace with inflation, and that's shrinking what buyers can realistically borrow.
What this means if you're trying to get a home loan
Here's the part most buyers don't think about until it's too late.
When interest rates are high, lenders use what's called a serviceability buffer, currently 3% above the actual loan rate, to stress-test whether you can afford the repayments. That buffer eats into your borrowing capacity significantly. A buyer who could qualify for $800,000 a couple of years ago might find their ceiling is now considerably lower.
If you've been pre-approved before but haven't checked your numbers recently, it's worth doing that now. Your borrowing power may have shifted more than you realise.
On top of that, rental growth is climbing again, up 2.1% in the March quarter alone, the sharpest rise since mid-2024. For renters trying to save a deposit while paying higher weekly rent, the window to get into the market isn't getting any easier.
Fewer qualified buyers, but the competition isn't gone
In markets like Perth and Adelaide, demand is still outstripping supply. In Sydney and Melbourne, affordability pressures have pushed serious buyers toward more affordable outer suburbs and regional areas, places where their borrowing limit can actually stretch far enough to make a purchase work.
This shift matters when you're planning your strategy. The suburbs moving fastest aren't always the obvious ones. And if you're waiting for prices to drop sharply before you act, the data doesn't really support that bet. Even with current rate pressures, most forecasts point to continued, if slower, price growth through 2026.
If your home loan pre-approval is current and your serviceability checks out, hesitation could cost you more than you expect. Property taken off the market today often comes back at a higher price next year. Now is the time to get across your numbers, understand your options, and make a plan rather than reacting on the fly.
Ready to make your move?
The market is shifting, and the right loan strategy makes a real difference right now. For tailored advice or to discuss your buying approach, reach out to KM Financial Services. Call us on 0402 879 531 or book a free consultation today. We're here to help you work through what's possible and put you in the best position to move forward.
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