Should you buy property in Australia - 2026?

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+6.10%

$737K

Average home loan size

6-month change

Previous: $694K

-1.31%

28.8%

High-risk debt ratios

quarterly change

Previous: 29.2%

-0.29%

43,666

Housing completions

2026-Q1

Previous: 43,795

+0.50%

4.35%

RBA cash rate

6-month change

Previous: 3.85%

By Mahendra Duddempudi & Vidhu Bajaj

14 Jul 2026

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

Based on ABS data to Nov 2025

ABS Housing Prices & Values ABS Average Weekly Earnings

📊 What's happening?

Australian housing is now much less affordable than a decade ago.

The price-to-income ratio soared from 7.

3 times in 2014 to 9.

3 times in 2025.

This 27% jump reflects house prices rising 91%, far outstripping the 50% income growth.

We're seeing affordability worsen again after 2023.

Key numbers:

2014: 7.3x income

2025: 9.3x income

+27% increase

🎯 Impact on buyers

Potential home buyers face a tough journey.

Getting onto the property ladder now demands a much larger income or a significantly bigger deposit.

Saving up takes longer, and the required loan amounts are substantial.

This makes home ownership increasingly challenging for many Australians.

💡 Key insight

Australian housing continues to outpace income growth significantly. The persistent climb in the price-to-income ratio, reaching 9.3x in 2025, shows ongoing affordability challenges. It's a clear long-term trend.

Practical advice:

Explore Australian government support like the First Home Guarantee. Focus on building a substantial deposit. Consider expert financial advice to navigate current market challenges and find a property within your budget.

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 4.35%, then dropped to 4.35%. Here's exactly what happened to buyer demand and lending volumes through the complete cycle.

2026 vs 2025

Quarterly home lending

$103.0B↑ +18%

2026 Q1

from $86.9B
in 2025 Q1

Cash rate vs lending volume: the real impact

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

Cash rate
Lending volume

Based on RBA & ABS data to Mar 2026

📊 Rate cycle analysis

RBA rate hikes, like those from 2022-Q2 to 2023-Q4, typically cool lending. We saw a dip from 93.6B to 74.6B. Conversely, rate cuts in 2025-Q1 to 2025-Q3 boosted lending from 86.9B to 98.3B. The current rate rises are again dampening volumes.

The market shows sensitivity to RBA cash rate changes. Lending volumes fell sharply during the 2022-2023 rate hikes. Following 2025's rate cuts, lending quickly rebounded. However, the recent 2026 rate increases have again seen volumes drop, demonstrating ongoing market sensitivity.

With the RBA cash rate at 4.35%, factor in higher borrowing costs. Budget for potential further rate movements. Evaluate serviceability carefully, especially as recent rate hikes have caused lending volumes to contract. Focus on long-term affordability.

The current rate environment, with recent RBA increases leading to reduced lending, may offer less competitive buying conditions. Watch for stabilisation or any potential future rate reductions before committing. Consider current affordability carefully.

Is there really a housing shortage, and where?

With 224k+ migrants arriving annually but only 168k dwellings completed, here's the real supply-demand story.

168k

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

Based on ABS data to Mar 2026

📊 Supply-demand gap analysis

High net overseas migration, peaking at 538,340 in 2023, rapidly escalated housing demand. Despite a cumulative surplus of 1.4 million dwellings since 2013, these recent elevated migration patterns create significant annual supply shortfalls, straining available housing stock across Australia.

Annual dwelling completions, around 172,000-177,000 from 2022-2025, are insufficient for recent migration levels. This leads to reduced annual surpluses; 2023 saw only 14,353 dwellings above migration-driven demand. This completion capacity struggles against current demand pressures.

Despite a historical cumulative surplus, the reduced annual dwelling surpluses driven by recent migration surges mean tighter market conditions. This implies increased competition for housing, upward pressure on rents, and sustained demand for property across Australia.

Given the persistent migration-driven demand and reduced annual supply surpluses, the market currently favours sellers. Buyers should expect ongoing competition. For long-term investors, sustained demand conditions remain favourable.

Are first home buyers being pushed out?

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

2026 vs 2025

First home buyer market share

18.5%→ 0.0pp

2026-Q1

from 18.5%
in 2025-Q1

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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

Based on ABS data to Mar 2026

📈 First home buyer market analysis

FHB market share is 18.5% in 2026-Q1, down from its 2020-Q4 peak of 27.66%. This trend reflects changing affordability and RBA cash rate movements. Despite ongoing government support, FHBs capture a smaller housing market proportion, signalling increased barriers to entry.

Investor market share sits at 40.34% in 2026-Q1, significantly above FHB's 18.5%. During FHB's peak (27.66% in 2020-Q4), investor share was 23.85%. Elevated investor activity correlates with reduced FHB access, intensifying market competition.

FHB market share surged from 11.6% in 2017-Q1 to 27.66% by 2020-Q4, coinciding with lower RBA cash rates. Post-2021, FHB activity has declined as market values rose and investor competition intensified.

Current market share (FHB 18.5%, Investor 40.34%) indicates high competition. FHBs should utilise government schemes and grants. Strategic entry during periods of reduced investor activity offers the best opportunity.

How risky are today's property loans?

28.13% of loans are above 80% LVR, 22.71% are interest-only. Here's what this means for market stability.

2026 vs 2025

High-LVR lending (80%+)

28.1%↑ +0.1pp

Q1 2026

from 28.0%
in Q1 2025

28.13%

High LVR loans (80%+)

22.71%

Interest-only loans

29.69%

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+)

Based on APRA data to Mar 2026

📊 Lending risk analysis

High-risk LVR lending above 95% reached 28.13% in Q1 2026, up from 20.51% in Q1 2020. This trend indicates increasing exposure to property price fluctuations. Lending below 60% LVR has decreased significantly to 2.51%, down from 9.37% in Q1 2020.

Interest-only lending climbed to 22.71% of total term loans in Q1 2026, up from 18.49% in Q1 2020. Investment interest-only loans are 15.55%, up from 11.12% in Q1 2020. This heightens repayment risk, especially with RBA rate changes.

High DTI lending (over 6x) stands at 29.69% in Q1 2026. Combined DTI over 4x is 80.56%. High LTI (over 6x) is 3.78%. These elevated ratios indicate substantial borrower stress, amplified by RBA interest rate increases.

The market faces high risk in Q1 2026. APRA’s measures are critical. Borrowers should assess their resilience to RBA rate rises, while investors need caution due to increasing LVR and interest-only exposures.

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

28.13%

High LVR Lending

First home buyers

First home buyers face low affordability but can utilise government schemes like the Home Guarantee Scheme. Stable RBA rates offer some certainty. Competition is high. Explore state grants and concessions. Focus on serviceability and a realistic property search.

Government support available

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

Property investors

Property investors should consider the balanced supply and stable RBA interest rates. High lending risk, evident in elevated LVRs, requires careful due diligence on debt servicing. Assess rental market dynamics and potential for capital growth. Competition remains a factor.

Current competition

FHB market share: 18.5% • Government scheme impact

📊 Our broker perspective

Market snapshot: The Australian property market in July 2026 shows low affordability with stable RBA interest rates. Supply is balanced. High lending risk persists due to elevated LVRs. First home buyer competition is strong, capturing a significant market share.

Key considerations: All buyers should monitor RBA interest rate stability and ongoing affordability pressures. Evaluate personal financial capacity against high lending risk indicators. Assess localised supply conditions. A thorough understanding of market dynamics informs prudent purchasing decisions.

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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