By Michael Yardney February 22, 2026

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How Can Property Prices Keep Rising When So Many Australians Can’t Afford to Buy?

Property Investment
How Can Property Prices Keep Rising When So Many Australians Can’t Afford to Buy?

Key takeaways

While affordability has worsened, property prices are still being set by buyers who remain active — high-income earners, business owners, investors, and downsizers.

These groups are less impacted by rising interest rates and continue to transact, particularly in desirable, tightly held suburbs.

A growing number of sales are being made without mortgages — around 26.5% of 2024 transactions in NSW, VIC, and QLD were all-cash purchases.

These “right sizers” sell expensive family homes and buy smaller properties outright, keeping prices resilient even during periods of high rates.

The Bank of Mum and Dad and early inheritances are now major market drivers.

Wealth transfers are helping younger Australians overcome deposit hurdles and boosting demand in entry and mid-tier markets — where government incentives add even more competition.

Rather than exiting the market, buyers are adapting: shifting to more affordable suburbs, choosing units over houses, or “rentvesting” (renting where they want to live while investing elsewhere).

These strategies broaden demand across multiple market segments.

Chronic housing undersupply remains the biggest force pushing prices up. With population growth, planning bottlenecks, and developer constraints, there simply aren’t enough homes to meet demand.

Combined with cashed-up buyers and intergenerational wealth, this imbalance ensures prices keep rising — even when affordability metrics suggest they shouldn’t.

If you’ve been shaking your head at recent property price growth, you’re not alone.

Australians everywhere are asking the same question:

“How on earth can property values keep rising when affordability is so stretched, interest rates are still high and unlikely to fall further, and many people seem to be struggling with the cost of living?”

It feels counterintuitive. It feels unfair. And to many, it feels unsustainable.

But here’s the thing - markets don’t move based on what’s fair or what people wish were true.

They move based on who is actually buying - and that group looks very different today than it did even a decade ago.

Let’s look at what’s really driving this next stage of the cycle, and why property prices can continue rising even when large parts of the population are locked out.

Property Prices

Affordability has dropped - but demand hasn’t disappeared

There’s no denying that the numbers are tough. Mortgage repayments have soared, everyday costs are up, and interest rate relief is looking less likely than many had hoped.

But prices aren’t set by the households who can’t buy, no matter how many of them there are. Prices are set by the households who can.

And right now, despite the headlines, there is still significant demand from groups that are less sensitive to interest rates and more cashed up than ever.

1. Wealthier buyers are dominating the market

Let’s start with the obvious but often overlooked point: There is a growing cohort of Australians who have the income, equity and the savings to keep buying, even at today’s prices.

They’re not scraping together a 5 per cent deposit. They’re not stretching their borrowing to the limit. Many aren’t even borrowing at all.

This top segment of the market - high-income professionals, business owners, and long-term investors - continues to grow in wealth.

These buyers are driving transactions in blue-chip suburbs and tightly held inner a middle ring locations.

Markets are set at the margins, and the marginal buyer today is not the average Australian.

2. Downsizers are buying debt-free, and they’re reshaping the market

This is one of the biggest forces propping up prices.

Many downsizers, who now like to be called "right sizers" sell a $2.5 - $3 million family home and buy a $1.5- $2 million apartment or townhouse outright - no mortgage, no borrowing restrictions, no rate sensitivity.

In fact, PEXA reported that around 26.5% of all property transactions in New South Wales, Victoria and Queensland in 2024 were made without a mortgage at all.

That’s extraordinary, and it completely changes how the market behaves during high-rate periods.

Downsizers don’t care if rates stay higher for longer. They move for lifestyle, not affordability.

And because they have deep pockets, they can easily outbid other buyers for quality stock.

3. The Bank of Mum and Dad is now one of Australia’s biggest lenders

We’re in the middle of one of the largest intergenerational wealth transfers in our history.

Parents are stepping in with deposit help, equity guarantees, or even outright gifts to get their kids onto the ladder.

Inheritances are arriving earlier, and this trend is only likely to continue as more baby boomers decide to pass on their wealth early.

4. First home buyer incentives are increasing demand in the tightest part of the market

Politically, both major parties support schemes that reduce deposit requirements or lower the cost of entry into property.

So the moral outrage over affordability doesn’t change the reality: policy is pushing more people into the market, not fewer.

Just look at the latest round of incentives.

Shared equity programs, low-deposit schemes, stamp duty concessions, targeted grants - meaning tens of thousands of first-time buyers are entering the market.

The problem is that these incentives add fuel to the entry-level market and now median price markets.

While some call these a first homeowner boost, I call them an “established homeowner bonus” because more demand is creating upward price pressure on established property.

5. Buyers are adapting their behaviour

Not everyone who wants to buy can afford their ideal property or location, and that’s always been the case.

But instead of dropping out of the market entirely, buyers are adjusting.

They’re compromising on location by moving to a different suburb, usually further out, and some are even moving to a more affordable capital.

Others are compromising on dwelling type, choosing units over houses, especially family-friendly apartments in desirable suburbs.

Yet others are “rentvesting” - renting where they want to live but investing where they can afford, a trend that is accelerating, with a recent study showing that around 10% of renters also own an investment property.

These behavioural shifts broaden the pool of demand across multiple segments of the market.

6. The structural undersupply is bigger than the affordability problem

This is the factor that overrides everything else. We just haven’t built enough homes for over a decade.

And now:

construction costs are still rising
many developers can’t make projects stack up financially
planning delays persist
population growth remains strong
household formation is rising
rental markets are stretched to breaking point

Fact is, you simply can’t solve a supply problem with wishful thinking.

When you combine enduring demand from less rate-sensitive buyers with severe, long-term supply constraints, the outcome is predictable:

Prices rise, even when affordability says they shouldn’t.

Why this matters for investors

Whether you are a property investor or a home buyer, if you’re waiting for “affordability” to return before buying again, you may be waiting forever.

Prices don’t fall to meet people's budgets - people adapt to the market.

The investors who will do well over the next decade understand:

Future price growth won’t be driven by interest rate cuts, it will be driven by structural undersupply, demographic shifts, and wealth concentration.
Quality assets in tightly held gentrifying suburbs will continue to outperform.
Strategy matters far more now than it did during the last few years as not all properties will increase in value in the same way.

This phase of the cycle rewards investors who take a strategic, top-down approach - focusing on the right states, the right suburbs, and the right types of property.

Final thoughts

Property doesn’t become unaffordable for everyone at the same time.

It becomes unaffordable for some groups sooner than others, and the buyers who remain active continue to set the price.

The real question isn’t “Why are prices rising when so many can’t afford to buy?”

The question you should be asking is:

How can you position yourself to be on the right side of this trend?

If you’d like to make 2026 the year you take advantage of these market conditions rather than be overwhelmed by them, now is the ideal time to speak with one of Metropole’s Wealth Strategists.

We can help you build a personalised, forward-looking strategic plan aligned with your goals, risk profile, timeframes, and financial capacity.

If you’re ready to move beyond the noise and put a proven framework around your next steps, click here to organise a complimentary Wealth Discovery Chat and position yourself to make the most of the opportunities ahead.

About Michael Yardney Michael is the founder of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and one of Australia's 50 most influential Thought Leaders. His opinions are regularly featured in the media.