Western Australia had its first notable increase in housing and rental affordability from September 2023 to March 2025, marking a pivotal moment for both tenants and homeowners. Significant progress has been made in improving mortgage affordability, as repayments now only represent 40.8% of the average household income, a decrease of 1.7 percentage points from the previous quarter (Q4 2024). A 0.3 percentage point drop in the average rental burden to 24.0% of family income indicates a minor improvement in rental affordability as well.

Several reasons are responsible for this good change:

1. The Reserve Bank of Australia (RBA) most famously lowered interest rates by 0.25 percentage points in February 2025, which decreased borrowing costs and eased the burden of home repayments. 
2. In Q1 2025, Western Australia experienced a 1.1% increase in median family incomes, thereby improving household buying power. 
3. Rising vacancy rates suggest a slow rebalancing of supply and demand, which helped to temper rent increases that had continued over the previous two years.

This development presents Bargoti Real Estate with a fresh opportunity. Tenants and buyers alike are likely to return to the market with greater confidence as affordability improves. It also marks a critical time for strategic realignment, whether through offering customised rental services, new buyer incentives, or trend-spotting advice to investors. These recovery indicators signal a fundamental shift that may influence market dynamics well into the second half of 2025.

What Triggered This Shift?

Three interrelated factors—

1. Interest rate reductions
2. Wage growth
3. A weakening rental market

When taken as a whole, these factors produced the first upward change in affordability measures since September 2023.

The Reserve Bank of Australia (RBA) reduced the official cash rate by 0.25 percentage points in February 2025. This calculated action directly reduced borrowing costs, resulting in lower monthly mortgage payments for both new and existing homeowners.

All people experienced less financial strain as a result of the rate reduction, especially first-time homebuyers and upgraders. Further relief may be imminent, paving the way for continued buyer enthusiasm, as speculation and preliminary indications suggest another 0.25% decrease in May 2025.

Western Australia saw an increase in family income during the same time frame. The median weekly family income increased by 1.1%, from $2,675 in Q4 2024 to $2,709 in Q1 2025. 

Residents have benefited significantly from this income rise, which has enabled more people to handle their mortgage or rental obligations without compromising their lifestyle or savings.

Additionally, renting affordability increased as average rental costs decreased to 24% of household income. This is partially explained by a temporary spike in vacancy rates that exceeded 2%, providing renters with more options and bargaining leverage.

Increased rental availability has begun to alleviate the fierce rivalry observed in previous quarters, indicating a more accessible and equitable rental market for WA’s tenants.

Here is a visual representation of the key triggers behind WA’s recent housing affordability improvement:

1. Mortgage Affordability improved from 42.5% to 40.8% of family income.
2. Rental Burden slightly eased from 24.3% to 24.0%.
3. Median Weekly Family Income rose from $2,675 to $2,709.

 Drivers of Affordability Improvement

1. In February 2025, the Reserve Bank of Australia (RBA) lowered the cash rate by 0.25 percentage points.

2. Lower monthly mortgage payments and rates.

3. In May 2025, another rate decrease is anticipated.

4. The median household income increased from $2,675 to $2,709 per week.

5. A 1.1% rise in income made houses more affordable.

6. The mortgage load decreased to 40.8% from 42.5%.

7. The vacancy rate exceeded 2%.

8. The increased supply made more rental possibilities available.

9. The burden of renting decreased from 24.3% to 24.0%.

10. The first increase in affordability since September 2023.

11. Represented a change for the better in WA for both tenants and purchasers.

Borrower vs. Tenant Affordability

Western Australia experienced a significant shift in housing affordability in the first quarter of 2025, offering some respite for both homeowners and tenants.

Nonetheless, the two groups’ levels of improvement differed, with mortgage holders experiencing greater benefits.

The affordability of mortgages increased dramatically, falling from 42.5% of household income to 40.8%. 

The Reserve Bank of Australia’s 0.25 percentage point interest rate decrease in February 2025, which reduced house loan repayments and boosted borrower confidence, was the leading cause of this 1.7 percentage point drop. 

Additionally, the mortgage load was reduced due to increased household incomes.

In the first quarter of 2025, a notable shift occurred in the affordability of housing in Western Australia, providing some relief to both homeowners and tenants.

However, the degree of improvement varied between the two groups, with mortgage holders reaping greater benefits.

Mortgages became much more affordable, dropping from 42.5% of family income to 40.8%.  

This 1.7 percentage point decline was primarily due to the Reserve Bank of Australia’s 0.25 percentage point interest rate cut in February 2025, which decreased home loan repayments and increased borrower confidence.  

Additionally, when family earnings improved, the mortgage load decreased as a percentage of household income.

Let’s focus on the Potential Risks Ahead.

Although Western Australia’s real estate market appears promising due to recent improvements in housing affordability, several risks may hinder long-term stability and accessibility, particularly for first-time homebuyers and lower-income tenants.

The comeback caused by pricing is one of the most urgent issues. Western Australia’s median home price increased by 22% over the previous year, reaching a median of $775,000. 

The recent improvements in affordability may be reversed by rising prices, even as they could also be a sign of robust market demand and economic stability. 

New purchasers may be priced out once again if wage growth fails to keep pace with rising property values, which would increase living expenses and stress levels related to housing.

The ambiguity around interest rate policy is another significant problem. Mortgage loads have been temporarily reduced by the RBA’s 0.25 percentage point decrease in February 2025 and the planned follow-up cut in May, but these reductions cannot continue. 

The RBA may need to tighten monetary policy again if inflation returns or the state of the world economy changes, which would raise borrowing costs and undermine recent gains in affordability.

With an estimated 7,700 units missing from the rental market, Western Australia is likewise experiencing structural rental shortages. 

Particularly in outer suburbs and regional areas, this supply imbalance, caused by population growth and a lack of new construction, continues to drive up rents and reduce the options available to tenants.

The economic burden is also increasing. In Western Australia, over 210,000 families now believe that housing is expensive.

This number is indicative of larger structural issues such as income inequality, gaps in housing supply, and ineffective rental assistance programs.

For Partners like Bargoti Real Estate, staying proactive in monitoring these risks and advising clients accordingly is essential. Long-term resilience will depend on balanced policy responses, diversified housing supply, and sustainable market growth strategies.

Conclusion

The first quarter of 2025 affordability improvements in Western Australia signal a turning point in the relationship between home market dynamics and economic policy. Both tenants and buyers have experienced their first significant respite since late 2023, thanks to the Reserve Bank of Australia’s modest interest rate reduction and consistent wage growth. Not only have these changes reduced household mortgage and rental obligations, but they have also given the real estate industry fresh hope.

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