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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+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%

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?

Australian housing has become much less affordable.

The price-to-income ratio jumped from 7.

3x in 2014 to 9.

2x by 2025 - a 26% increase.

House prices rose 89% while incomes grew 50%.

This gap makes home ownership a bigger financial challenge.

Key numbers:

2014: 7.3x income

2025: 9.2x income

+26% increase

🎯 Impact on buyers

For potential home buyers, it means needing significantly more income or a larger deposit than a decade ago.

Servicing a mortgage is a bigger burden, making entry into the property market harder for many.

Saving enough deposit now takes much longer.

💡 Key insight

Australian housing affordability is worsening, pushing the income multiple to new peaks. Even with recent fluctuations, the long-term trend shows a clear and growing disconnect between house prices and average incomes.

Practical advice:

Buyers should meticulously budget and explore government schemes like the First Home Guarantee. Look at properties outside traditional hotspots or consider smaller dwellings. Be prepared for a longer saving journey.

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)

📊 Rate cycle analysis

Rapid RBA cash rate increases from 0.85% in 2022-Q2 to 3.6% in 2023-Q1 saw lending volumes drop from $86.5 billion to $65.8 billion. Conversely, the rate cut cycle from 4.35% to 3.6% in 2025-Q1 to 2025-Q4 boosted lending from $86.9 billion to $107.0 billion.

The market showed resilience as lending volumes recovered from $75.7 billion (2024-Q1) to $86.7 billion (2024-Q4) despite RBA cash rate stabilising at 4.35%. Still, recent RBA rate increases to 4.1% in 2026-Q1 caused lending to decrease 3.8% from $107.0 billion to $103.0 billion.

With the RBA recently increasing the cash rate to 4.35%, buyers face higher borrowing costs. Lending activity in 2026-Q1 was $103.0 billion, down from $107.0 billion in 2025-Q4, showing market sensitivity to renewed rate hikes. Budget for potential further volatility.

Recent RBA rate increases to 4.35% indicate renewed volatility. Consider delaying purchases until the RBA signals a consistent easing cycle. Lending volumes decreased 3.8% in 2026-Q1, suggesting caution is warranted.

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)

📊 Supply-demand gap analysis

Migration patterns directly influence housing demand, with each migrant contributing 0.3 dwellings. While cumulative completions since 2012 exceed migration-driven demand by 1,393,519 dwellings, recent high migration levels are creating short-term demand surges, potentially outpacing immediate supply.

Australia's dwelling completion capacity has consistently outpaced migration-driven demand since 2012, resulting in a cumulative surplus of 1,393,519 dwellings. While 2023 saw the smallest annual surplus at 13,844 dwellings, overall completions continue to exceed this specific demand.

The persistent cumulative surplus of completions over migration-driven demand, totaling 1,393,519 dwellings, suggests broader market pressures extend beyond net overseas migration alone. Property market participants should analyse other demand drivers beyond this specific migration metric.

Despite recent high migration, the data shows no cumulative supply shortage against migration-driven demand, with a 1,393,519 dwelling surplus. Market timing should therefore consider other, broader housing supply and demand dynamics beyond just migration numbers.

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)

📈 First home buyer market analysis

First Home Buyer market share peaked at 27.66% in 2020-Q4. It has significantly declined to 18.50% by 2026-Q1, a 9.16 percentage point reduction. This trend suggests challenges for FHBs despite expanded government schemes.

Investor competition is currently high at 40.34% in 2026-Q1, nearing the 2016-Q4 peak of 40.66%. This increased investor activity, combined with RBA rate rises, makes FHB entry more difficult, eroding their market access compared to previous periods.

FHB activity peaked sharply in late 2020 (27.66%), likely driven by RBA rate cuts and initial support. Since then, FHB market share has trended downwards, indicating a sustained challenge as interest rates rose and competition intensified.

First home buyers face high competition with 40.34% investor share. Utilise current 5% deposit schemes and expanded grants. Monitor RBA decisions closely, as market entry remains challenging with FHB share at 18.50%.

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

Q2 2025 lending with LVR over 80% is 31.16%, high. Over 90% LVR reached 6.71% (4.55% for 90-95%, 2.16% for 95%+) reflecting continued higher leverage. While slightly down from 2021 peaks in the highest LVR segments, the substantial >80% LVR component indicates risk concentration.

Interest-only lending rose to 21.24% in Q2 2025, primarily driven by investment loans at 14.43%. This continued growth, especially for investors, raises repayment risk in a rising RBA interest rate environment. APRA monitors these levels for market stability.

High LTI (>6x) lending reduced to 3.10% in Q2 2025, down from 2021 peaks. High DTI (>6x) also fell to 5.47%. This trend reflects improved borrower serviceability due to RBA rate adjustments and APRA's macroprudential measures, reducing new high-multiple borrower stress.

APRA assesses market stability as 'high risk'. High LVR lending over 80% is substantial at 31.16%, and interest-only loans are rising. Borrowers must maintain strong serviceability. Investors face higher repayment risks as RBA rates test capacity.

Market timing insights

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

Poorly Affordable

48.4%

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 Australian Government's 5% Deposit Scheme, offering unlimited spots and no LMI. Single parents can access 2% options. Despite high competition, these schemes reduce barriers. Evaluate your long-term financial stability and use government support effectively.

Government support available

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

Property investors

Property investors face a market with high lending risk, shown by significant high LVR lending. First home buyer competition is also strong. Prudent investors should carefully assess potential returns against current risk profiles and market supply-demand dynamics. Diversification and robust due diligence are key.

Current competition

FHB market share: 18.5% • Government scheme impact

📊 Our broker perspective

Market snapshot: Australian property currently shows moderate affordability and stable RBA interest rates at 4.1%. Supply is balanced. High lending risk is evident with 31.16% high LVR. First home buyer competition remains elevated, indicating a dynamic market environment for all participants.

Key considerations: All buyers should consider stable RBA interest rates at 4.1% and balanced supply conditions. Moderate affordability requires careful budgeting. Evaluate personal financial resilience against potential market shifts. A thorough assessment of individual circumstances and risk tolerance remains crucial for any property decision.

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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