Should you buy property in Australia - 2025?

Name: Australian Property Market Insights Dataset
Creator: Bheja.ai
Published: 2025-10-01T11:53:55.231Z
License: https://creativecommons.org/licenses/by/4.0/

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+2.60%

$693K

Average home loan size

6-month change

Previous: $675K

+3.63%

5.3%

High-risk debt ratios

quarterly change

Previous: 5.1%

+7.52%

44,119

Housing completions

2025-Q3

Previous: 41,034

+0.25%

3.85%

RBA cash rate

6-month change

Previous: 3.6%

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)

ABS Housing Prices & Values ABS Average Weekly Earnings

📊 What's happening?

Well, the price-to-income ratio in Australia has surged dramatically from 6.

4x in 2014 to 9.

0x by 2025.

This 41% jump means homes are increasingly unaffordable relative to earnings, even with a slight dip in 2023, the trend is up.

House prices soaring 84% against a mere 30% income growth tells the real story.

Key numbers:

2014: 6.4x income

2025: 9.0x income

+41% increase

🎯 Impact on buyers

For aspiring homeowners, this translates to a much tougher journey.

You'll need significantly more income or a much larger deposit to even consider buying, making entry into the market incredibly challenging.

Saving enough takes longer, and mortgage repayments become a far heavier burden on household budgets.

💡 Key insight

The market clearly shows a severe and worsening disconnect between housing values and earning capacity, pushing affordability to critical levels. Property is a significant wealth builder, but it's becoming unattainable for many.

Practical advice:

Given this, focusing on disciplined savings and exploring government assistance programs is crucial. Also, consider areas further out or alternative housing models like co-ownership to get a foot in the door.

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 4.5%, then dropped to 3.6%. 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)

📊 Rate cycle analysis

Recent rate cuts from 4.1% to 3.6% have ignited lending volumes, with a robust 12.2% surge from Q1 to Q3 2025, reaching $98B. This contrasts sharply with the lending decline of nearly 30% experienced during the 2022-2023 rate hikes, showcasing a clear inverse relationship.

Initially, the market showed sensitivity to rate hikes, with lending dropping 29% from 2022-Q1 to 2023-Q1. However, recent rate cuts have spurred rapid recovery, with volumes increasing over 12% from Q1 to Q3 2025. This suggests underlying resilience as affordability improves.

With rates decreasing to 3.6% and lending volumes rising, buyers have improved borrowing power. Focus on locking in competitive rates now and understand your long-term repayment capacity, anticipating potential further rate stability or small decreases.

Rates are falling and lending is surging, indicating a strong buyer's market in terms of affordability. Acting soon might capitalize on current favorable rates before potential market price appreciation intensifies competition.

Is there really a housing shortage, and where?

With 242k+ migrants arriving annually but only 185k dwellings completed, here's the real supply-demand story.

185k

Mean dwellings completed/year

242k

Mean net migration/year

+1.3M

Cumulative surplus since 2012?

Supply vs demand: the real story

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

📊 Supply-demand gap analysis

Migration consistently drives significant housing demand, with an average of 242,474 net overseas migrants annually (2014-2025). This generates demand for over 72,000 dwellings per year (0.3 per migrant). However, cumulative dwelling completions have exceeded this specific demand.

Despite high migration, dwelling completions have cumulatively outpaced migration-driven demand since 2012, resulting in a 1.35 million dwelling surplus. Even during peak migration in 2023 (538,340 migrants), completions generated a 13,841 dwelling surplus against migration-specific demand.

The cumulative surplus of 1.35 million dwellings suggests that current property market pressures are not solely due to migration-driven demand unmet by supply. Other factors, like internal migration or dwelling utilization, likely contribute more to any perceived supply shortages.

Given the substantial cumulative housing surplus relative to migration-driven demand, market participants should scrutinize other demand drivers. Relying solely on migration to predict future housing shortages may overlook the long-term surplus data.

Are first home buyers being pushed out?

FHB market share rose from 13.3% (2016) to 17.8% (2025). Here's the complete picture.

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17.82%

Current FHB market share

27.66%

Peak FHB share

+4.55%

Change since 2016

$17B

Recent FHB value

FHB market share vs investor competition

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

📈 First home buyer market analysis

FHB market share peaked at 27.66% in 2020-Q4, reflecting favourable conditions. It has since declined to 17.82% in 2025-Q3, a 9.84 percentage point drop from peak. This suggests a challenging environment for first home buyers, even with government schemes, perhaps due to rising rates and prices.

Investor competition heavily impacts FHBs. At FHB peak (2020-Q4), investor share was 23.80%. Now, with FHB share at 17.82% (2025-Q3), investor share is 40.59%, nearing its historical peak (40.65% in 2016-Q4). This intense competition reduces FHB market access despite policy support.

FHB share peaked in 2020-Q4 (27.66%) during low interest rates, then declined. Investor share surged from 24.83% (2021-Q1) to 40.59% (2025-Q3), pushing FHBs down. This indicates sensitivity to economic cycles and investor sentiment, despite ongoing policy support.

With FHB share at 17.82% (2025-Q3) and robust investor competition (40.59%), FHBs face challenges. Leverage expanded government schemes. Be prepared for competitive markets; focusing on less investor-driven segments or properties might improve success rates given current dynamics.

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)

📊 Lending risk analysis

Current high-risk LVR (80%+) stands at 31.16% in Q2 2025. While down from a peak of 39.06% (Q2 2021), it slightly increased from Q1 2023's 27.57%. Loans >90% LVR remain moderated, but the overall 80%+ segment persists as a notable risk.

Interest-only (IO) lending reached 21.24% in Q2 2025, increasing from 18.86% in Q1 2023. Investment IO is 14.43%, owner-occupied 5.97%. This rise, coupled with higher rates, signals increased repayment risk, particularly as IO periods expire.

High loan-to-income (LTI >6x) and debt-to-income (DTI >6x) lending has significantly decreased. LTI >6x is now 3.10% and DTI >6x is 5.47% in Q2 2025, sharply down from 2021 peaks (11.00% and 24.32% respectively), indicating reduced immediate borrower stress.

Overall market stability is assessed as high-risk despite improved LTI/DTI metrics. Borrowers and investors should remain cautious due to rising interest rates, elevated LVR (80%+) concentration at 31.16%, and increasing interest-only debt (21.24%).

Market timing insights

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

Poorly Affordable

47.5%

of income for mortgage

Stable Rates

3.6%

RBA Cash Rate

Balanced Supply

17.82%

FHB Market Share

High Risk

31.16%

High LVR Lending

First home buyers

First home buyers benefit from generous government schemes offering 5% (or 2% for single parents) deposits and no LMI, with no income caps. Despite high competition and low affordability, these schemes significantly lower entry barriers. Thoroughly assess your budget and leverage available support.

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Property investors

Investors face high lending risk and strong FHB competition. While stable interest rates and balanced supply offer some market stability, careful due diligence is paramount. Focus on asset selection, potential rental yields, and long-term growth prospects given current affordability and LVR trends.

Current competition

FHB market share: 17.82% • Government scheme impact

📊 Our broker perspective

Market snapshot: The Australian property market exhibits low affordability and high lending risk. While interest rates are stable and supply is balanced, strong first home buyer competition is evident, influencing overall market dynamics. Buyers should proceed cautiously.

Key considerations: All buyers should evaluate prevailing low affordability, stable interest rates, and elevated lending risk. Prudent financial planning, stress-testing budgets, and comprehensive property research are essential. Understanding your long-term financial capacity is crucial for navigating today's market effectively.

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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