How are property prices still increasing despite many Australians unable to afford?

t suburb, choosing units over houses, or engaging in the popular strategy of “rentvesting” – renting where they want to live while purchasing property elsewhere to build wealth.
These adjustments broaden demand across different segments of the market and ensure that there are always buyers looking for property – even if they aren’t buying the most expensive homes.
The chronic undersupply of housing remains a key factor in driving prices up
For years, Australia has not been building enough homes to keep up with population growth.
This has created a chronic undersupply that continues to put upward pressure on prices, even during times when affordability metrics suggest that prices should be falling.
Developers face constraints on building new homes due to planning bottlenecks, while existing homeowners hold onto property, contributing to a lack of available stock.
Combined with buyers who have more money to spend and intergenerational wealth transfers, this housing shortage ensures that prices remain high, regardless of other factors.
In conclusion, while affordability may have deteriorated for many Australians, property prices continue to rise due to active buyers who are able to transact in the current market. High-income earners, business owners, investors, and downsizers are less affected by rising interest rates and are driving transactions in desirable areas. A significant number of sales are now cash purchases, with downsizers leading the trend. The influence of the Bank of Mum and Dad, early inheritances, and government incentives for first-time buyers are boosting demand and reshaping the market. Buyers are adapting to affordability challenges by changing their preferences, broadening demand across different segments of the market. The persistent undersupply of housing remains a key factor pushing prices up, reinforced by cashed-up buyers and intergenerational wealth transfers. This combination of factors ensures that property prices continue to rise, even as affordability concerns persist.