Should you buy property in Australia - 2025?

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+6.10%

$737K

Average home loan size

6-month change

Previous: $694K

+3.63%

5.3%

High-risk debt ratios

quarterly change

Previous: 5.1%

-1.78%

43,390

Housing completions

2025-Q4

Previous: 44,176

+0.75%

4.35%

RBA cash rate

6-month change

Previous: 3.6%

Written by

Mahendra Duddempudi

CTO & Head of Research

How much harder has it become to buy a home?

The relationship between house prices and wages tells the real story of Australia's housing affordability crisis.

House price to income ratio: the growing gap

Median house prices vs average weekly earnings (2014-2025)

Median house price
Average annual income

ABS Housing Prices & Values ABS Average Weekly Earnings

📊 What's happening?

Australian housing affordability has worsened considerably.

The price-to-income ratio rose from 7.

3 times in 2014 to 9.

3 times by 2025 - a 27% jump.

House prices grew 91%, while incomes only rose 50%.

This means homes demand much more income than a decade ago.

Key numbers:

2014: 7.3x income

2025: 9.3x income

+27% increase

🎯 Impact on buyers

Potential homeowners face a much harder climb.

Saving for a deposit takes far longer, and securing a mortgage for a larger loan is tougher when incomes haven't kept pace.

Many Australians find themselves priced out of the market entirely.

💡 Key insight

The Australian housing market consistently pressures affordability. While 2023 offered a brief reprieve, the trend for house price growth continues to outstrip income rises significantly.

Practical advice:

Research government schemes like the First Home Guarantee. Focus on disciplined saving for a larger deposit. Explore properties in outer suburbs or regional centres for better value.

Confused by what you can actually afford?

Affordability isn't just about income multiples. Our experts factor in your complete financial picture, including government schemes, deposit sources, and lending policies that banks won't tell you about.

Borrowing calculator

Will rising interest rates crash the property market?

Rates rose from 0.1% to a peak of 16.75%, then dropped to 4.35%. Here's exactly what happened to buyer demand and lending volumes through the complete cycle.

Cash rate vs lending volume: the real impact

RBA cash rate and housing lending volumes (last 24 months)

Cash rate
Lending volume

📊 Rate cycle analysis

After RBA cash rate cuts to 3.6% in 2025, lending peaked at $107 billion in 2025-Q4. Subsequent rate rises to 4.1% in 2026-Q1 saw lending decrease to $103 billion, indicating immediate sensitivity. Further rate increases to 4.35% will likely sustain this trend.

The market initially showed sensitivity, with lending falling by 29.7% from 2022-Q1 to 2023-Q1 amidst rate hikes. However, during the RBA cash rate stabilisation at 4.35% (2023-Q4 to 2024-Q4), lending grew 16% to $86.7 billion, demonstrating strong resilience.

The RBA cash rate is now 4.35%. Buyers should meticulously assess affordability, stress testing repayments for any further rises. Prioritising pre-approval is crucial to understand precise borrowing capacity and navigate prevailing market conditions.

With RBA rates just increased to 4.35%, the current trend suggests cooling demand. Historically, lending surged during rate cuts. Patient buyers might benefit from waiting for clearer RBA easing signals for optimal timing.

Is there really a housing shortage, and where?

With 242k+ migrants arriving annually but only 189k dwellings completed, here's the real supply-demand story.

189k

Mean dwellings completed/year

242k

Mean net migration/year

+1.4M

Cumulative surplus since 2012?

Supply vs demand: the real story

Annual dwelling completions vs migration-driven demand (showing recent years)

Dwelling completions
Housing demand from migration
Migration inflow

📊 Supply-demand gap analysis

Migration patterns significantly drive housing demand, impacting supply gaps. Net overseas migration soared to 538,340 in 2023, creating demand for approximately 161,502 dwellings that year. This rapid increase has put considerable pressure on the housing market, despite a cumulative surplus of 1.39 million dwellings since 2012.

Dwelling completions averaged 188,869 annually. Current capacity produced 175,346 completions in 2023 against high migration-driven demand of 161,502 dwellings, a narrow 13,844 surplus. Capacity is projected to create an 80,439 dwelling surplus in 2025, up from 47,830 in 2024, easing pressure.

Australia holds a cumulative 1.39 million dwelling surplus against migration-driven demand since 2012. This mitigates long-term pressures. High short-term migration inflow, like 2023's 538,340, can cause temporary localised tightness. Supply is outpacing migration-driven demand from 2023 to 2025, albeit narrowly in 2023.

The cumulative 1.39 million dwelling surplus indicates structurally sound long-term supply relative to migration. Despite recent migration spikes, like 2023's 538,340 inflow, projected annual surpluses up to 2025 suggest ongoing capacity. This balance offers some stability for market participants.

Are first home buyers being pushed out?

FHB market share rose from 13.3% (2016) to 18.5% (2026). Here's the complete picture.

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18.5%

Current FHB market share

27.66%

Peak FHB share

+5.23%

Change since 2016

$19B

Recent FHB value

FHB market share vs investor competition

First home buyer and investor market share trends (quarterly data)

FHB market share
Investor share

📈 First home buyer market analysis

FHB market share peaked at 27.66% in 2020-Q4 during low RBA rates and initial government stimulus. It has since declined to 18.50% in 2026-Q1. This 9.16 percentage point drop indicates reduced FHB participation despite recent government backing like the 5% Deposit Scheme.

Investor competition is currently high at 40.34% of the market in 2026-Q1. This contrasts sharply with the FHB share of 18.50% at the same time. When FHB share peaked at 27.66% in 2020-Q4, investor share was much lower at 23.85%, showing clear inverse dynamics influenced by RBA rates.

FHB activity surged from 2019-Q2 (20.45%) to a peak in 2020-Q4 (27.66%), aligning with favourable RBA interest rates. A subsequent decline to 18.50% by 2026-Q1 reflects rising rates and increased investor presence, reversing earlier gains despite policy support.

FHBs face increased competition with current investor share at 40.34% and their own share at 18.50%. Utilise expanded government schemes for support. Monitor RBA rate decisions closely, as market entry may become easier with sustained rate stability or reductions.

How risky are today's property loans?

31.16% of loans are above 80% LVR, 21.24% are interest-only. Here's what this means for market stability.

31.16%

High LVR loans (80%+)

21.24%

Interest-only loans

5.47%

High debt-to-income (6x+)

High Risk

Market stability

Lending risk trends

High-risk lending patterns across LVR, interest-only, and income multiples (quarterly data)

High LVR (80%+)
Interest-Only
High DTI (6x+)

📊 Lending risk analysis

Latest data for Q2 2025 shows 31.16% of new lending has LVRs over 80%, down from 37.66% in Q2 2019. Lending with LVR over 95% reached 2.16% in Q2 2025, up from 1.35% in Q2 2019. Lower LVRs (below 60%) rose to 28.05% in Q2 2025 from 21.44% in Q2 2019.

Interest-only lending stands at 21.24% of new loans in Q2 2025, up from 20.87% in Q2 2019. Investment interest-only loans are 14.43%, up from 12.64% in Q2 2019. Owner-occupied interest-only loans are 5.97%, down from 7.78%. RBA rate rises test these borrowers' repayment capacity.

High loan-to-income (LTI 6x+) lending decreased to 3.10% in Q2 2025, down from a peak of 11.00% in Q4 2021. High debt-to-income (DTI 6x+) lending fell to 5.47% in Q2 2025, down from 24.33% in Q4 2021. APRA's serviceability measures impact these trends.

The market faces high risk. APRA's measures reduced high LTI/DTI lending, but interest-only remains elevated, particularly for investors. Borrowers should assess repayment capacity with RBA rate impacts. Investors should exercise caution.

Market timing insights

Our broker perspective on current market conditions based on comprehensive data analysis

Poorly Affordable

49.1%

of income for mortgage

Stable Rates

4.35%

RBA Cash Rate

Balanced Supply

18.5%

FHB Market Share

High Risk

31.16%

High LVR Lending

First home buyers

First home buyers benefit from the 5% Deposit Scheme, offering no LMI and unlimited spots. Single parents have a 2% option. Despite high competition and low affordability, these government supports significantly reduce entry barriers, making now a viable time for some.

Government support available

5% deposit scheme with no income caps • No LMI • Unlimited spots

Property investors

Property investors face elevated lending risk, indicated by high LVRs, and strong competition from first home buyers. A balanced supply suggests stable pricing, but careful due diligence on asset selection and financial leverage is crucial in this environment.

Current competition

FHB market share: 18.5% • Government scheme impact

📊 Our broker perspective

Market snapshot: Australia's property market shows low affordability and high lending risk, despite stable RBA interest rates at 4.35%. Supply is balanced, yet first home buyer competition remains elevated. Buyers face a challenging landscape requiring careful financial planning.

Key considerations: All buyers should consider their financial capacity given low affordability and current RBA rates. Stable interest rates offer certainty, but high lending risk means robust financial health and a clear long-term strategy are paramount for market participation.

Important note

This analysis is based on current market data and trends. Individual circumstances vary significantly. We recommend speaking with one of our mortgage brokers for personalized advice tailored to your specific situation.

About the Author

Mahendra Duddempudi

CTO & Head of Research

Mahendra Duddempudi is the CTO, Founder, and Head of Research at Bheja.ai. With 15+ years in software architecture, data engineering, and analytics, he combines technology and research to simplify complex topics in property, home loans, and finance. His work focuses on using AI, natural language search, and data-driven insights to make financial decisions clearer and more accessible for Australians.

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