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%

-0.29%

43,666

Housing completions

2026-Q1

Previous: 43,795

+0.75%

4.35%

RBA cash rate

6-month change

Previous: 3.6%

By Mahendra Duddempudi

01 Oct 2025

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 significantly.

The price-to-income ratio jumped from 7.

3 times in 2014 to 9.

3 times by 2025.

This 27% increase shows house prices climbed 91%, while incomes only rose 50% over the same period.

It's much harder for average earners to buy a home now.

Key numbers:

2014: 7.3x income

2025: 9.3x income

+27% increase

🎯 Impact on buyers

For potential home buyers, this means you need to save a much bigger deposit and take on a larger mortgage.

Despite a slight dip in 2023, the ratio is trending upwards again.

Securing a loan requires a significantly higher income multiple than a decade ago, making entry challenging for many.

💡 Key insight

The housing market clearly shows a persistent disconnect between property value growth and income gains. Australian homes are becoming proportionally more expensive relative to what people earn. This trend limits access for many.

Practical advice:

Buyers should explore government support like the First Home Guarantee. Focus on diligently saving a deposit and budgeting for higher repayments. Consider professional financial advice to navigate current affordability challenges effectively.

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.

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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

Initial sharp RBA rate rises from Q2 2022 to Q1 2023 saw lending volumes plummet by 29.7%, from $93.6 billion in Q1 2022 to $65.8 billion in Q1 2023. Conversely, RBA rate cuts from Q1 to Q4 2025 boosted lending by 23.1%, from $86.9 billion to $107 billion.

The property market showed sensitivity to early RBA rate hikes, with lending dropping. It demonstrated strong resilience, with volumes rising from Q2 2023 despite some further rate increases. Recent rate cuts sparked significant lending growth, showing clear market response.

With the RBA cash rate now at 4.35%, affordability is a key consideration. Lending volumes typically decline after rate rises. Buyers should factor in potential further rate adjustments and ensure their finances are robust for current conditions.

Current rising RBA rates (now 4.35%) typically reduce lending. Historical data suggests rate cuts later drive demand. Buyers may find less competition now, but must manage higher loan costs.

Is there really a housing shortage, and where?

With 224k+ migrants arriving annually but only 178k dwellings completed, here's the real supply-demand story.

178k

Mean dwellings completed/year

224k

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, creating supply gaps when completions lag. Despite a cumulative surplus of 1.44 million dwellings since 2012, recent high migration, like 538,340 in 2023, is rapidly absorbing available stock. This accelerates competition for housing.

Current dwelling completions, projected around 172,000-177,000 annually for 2023-2025, are insufficient for recent migration surges. In 2023, the supply surplus against migration-driven demand was only 14,353 dwellings, the lowest in years, indicating constrained capacity.

The tight supply-demand balance, driven by strong migration and limited completions, points to continued pressure on property markets. Expect sustained rental growth and upward price movements, especially in major urban centres.

Given the persistent supply shortages relative to migration, property market participants face a seller's market for the foreseeable future. Strategic buying opportunities may emerge with any moderation in migration or significant boost in building completions.

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, boosted by low RBA rates. It has since declined significantly to 18.5% by 2026-Q1. Despite government schemes like the 5% Deposit Scheme, FHB participation remains well below its peak. This indicates ongoing affordability challenges.

Investor competition heavily impacts FHB access. In 2026-Q1, investor share was 40.34%, substantially higher than FHB's 18.5%. This contrasts sharply with 2020-Q2, when investor share was 25.71% and FHB share was 25.59%. RBA rate rises initially cooled investor activity, but they are now returning strongly.

FHB activity peaked at 27.66% in 2020-Q4, following a rise from a low of 11.6% in 2017-Q1. This coincided with historically low RBA interest rates. Since then, FHB share has largely decreased as investor activity rebounded significantly, reaching over 40% by 2025-Q3.

Given current FHB market share at 18.5% and high investor competition at 40.34%, first home buyers face a challenging market. Government support schemes are valuable. It is a time for strategic planning and leveraging available assistance amidst RBA rate uncertainty.

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 personalised 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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