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

-8.78%

5.1%

High-risk debt ratios

quarterly change

Previous: 5.6%

-6.54%

40,386

Housing completions

2025-Q2

Previous: 43,213

-0.25%

3.6%

RBA cash rate

6-month change

Previous: 3.85%

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 significantly less affordable, jumping from 7.

4 times income in 2014 to 9.

7 times by 2025, a 31% increase.

This shows house prices have soared far ahead of wages, though the ratio has somewhat stabilized around 9.

7x since 2023 after peaking.

Key numbers:

2014: 7.4x income

2025: 9.7x income

+31% increase

🎯 Impact on buyers

For potential home buyers, this means you'll need substantially more income or a much larger deposit to purchase a home than a decade ago.

It makes entry into the property market incredibly challenging, prolonging the saving period and increasing mortgage burdens relative to earnings.

💡 Key insight

The gaping 79% rise in house prices versus a mere 36% income growth reveals a severe, structural affordability challenge in the Australian housing market.

Practical advice:

Given the persistent high price-to-income ratio, buyers must prioritize aggressive savings and thoroughly research all government first-home buyer schemes. Consider broadening your location search or starting with a smaller property.

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

Initial rate hikes (2022-Q2 to 2023-Q1) severely impacted lending, which fell 29% from $94.3B to $66.3B. However, the three recent rate cuts (2025-Q1 to 2025-Q3), dropping rates from 4.1% to 3.6%, have spurred a strong 12% rebound in lending volumes, reaching $98.0B.

Initially sensitive to hikes, lending volumes fell 29% (2022-Q2 to 2023-Q1). But 2024's stabilization and 2025's rate cuts (now 3.6%) show strong resilience. Lending surged over 12% to $98.0B by 2025-Q3, nearing prior record levels, proving market adaptability.

With rates at 3.6% and lending volumes surging, buyers benefit from improved affordability. Secure pre-approval and assess long-term repayment capacity. Increased competition may push prices, so factor this into your budget and strategy carefully.

With rates at 3.6% and lending surging, market momentum is strong. Historically, falling rates and rising lending often precede price growth. Acting now could capitalize on current affordability before prices fully reflect these favorable conditions.

Is there really a housing shortage, and where?

With 201k+ migrants arriving annually but only 179k dwellings completed, here's the real supply-demand story.

179k

Mean dwellings completed/year

201k

Mean net migration/year

+1.5M

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 significantly influence housing demand, creating substantial pressure. However, cumulatively since 2012, Australia has built 1,545,847 more dwellings than required by migration-driven demand. While recent migration highs (e.g., 535,520 in 2023) strain short-term supply, the long-term trend indicates a cumulative surplus against this specific demand component.

Despite high migration in 2023 (535,520 migrants), dwelling completions (175,329) still outpaced migration-driven demand (160,656). The 2024 forecast shows a similar trend with completions (176,554) exceeding demand (133,692). This data suggests current dwelling capacity is largely meeting migration-driven demand, challenging perceptions of direct supply shortages from this factor.

Given the 1,545,847 cumulative dwelling surplus against migration-driven demand since 2012, property market shortages are likely driven by other demand segments (e.g., existing household formation, investment demand) or supply impediments, rather than solely direct migrant housing needs.

With a significant cumulative dwelling surplus (1,545,847) relative to migration-driven demand, market timing decisions should prioritize analysis of broader economic conditions, interest rates, and other non-migration demand factors.

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. It has significantly declined to 17.82% by 2025-Q3, a 9.84 percentage point drop from its peak and below the 19.39% average. This suggests recent policies are not fully offsetting underlying market pressures for FHBs.

Investor market share rose sharply from 23.80% in 2020-Q4 to a dataset-high of 40.59% in 2025-Q3. This 16.79 percentage point increase highlights intensifying competition for FHBs, significantly impacting their access despite government support.

FHB activity peaked strongly in 2020-2021 (e.g., 27.66% in 2020-Q4) amidst low rates. As investor share surged from 24.83% (2021-Q1) to 40.59% (2025-Q3), FHB share consistently declined, indicating a shift in market dynamics.

With current FHB market share at 17.82% and investor competition at 40.59% (2025-Q3), conditions remain tough. FHBs must strategically utilize all available government schemes like the 5% Deposit Scheme to improve their buying position.

How risky are today's property loans?

30.33% of loans are above 80% LVR, 19.95% are interest-only. Here's what this means for market stability.

30.33%

High LVR loans (80%+)

19.95%

Interest-only loans

5.16%

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

High-risk LVR (90-95% and 95%+) shows fluctuations. LVR 90-95% was 7.68% in Q1 2019, peaked at 9.71% in Q4 2020, now 4.56% (Q1 2025). LVR 95%+ is 2.06% (Q1 2025). Total high-LVR (>80%) lending is 30.33% (Q1 2025), indicating significant collateral risk.

Interest-only lending is 19.95% (Q1 2025), up from 19.51% (Q1 2019). Investment interest-only loans (13.50%) exceed owner-occupied (5.75%). This sustained level, amid rising rates, could pressure borrowers as terms expire, posing repayment risk.

High LTI (6x+) lending decreased sharply from 10.80% (Q4 2021) to 2.97% (Q1 2025). High DTI (6x+) lending plummeted from 23.88% (Q4 2021) to 5.16% (Q1 2025). This shows improved borrower capacity and reduced stress, aligning with macroprudential efforts.

Despite 'decreasing' risk trends, market stability remains 'high_risk'. Prudent lending standards on income multiples reduced tail risks. However, sustained interest-only (19.95%) and high-LVR loans (30.33%) warrant continued vigilance for participants.

Market timing insights

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

Poorly Affordable

51.1%

of income for mortgage

Stable Rates

3.6%

RBA Cash Rate

Balanced Supply

17.82%

FHB Market Share

High Risk

30.33%

High LVR Lending

First home buyers

First home buyers benefit from generous government deposit schemes with no income caps or LMI, reducing entry barriers. Despite high FHB competition and low affordability, stable rates offer some certainty. Leverage schemes, secure pre-approval, and research thoroughly for optimal timing.

Government support available

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

Property investors

Investors face a market with stable rates but elevated lending risk due to high LVRs. Strong first home buyer competition may impact entry-level segments. Focus on due diligence, assess property-specific risks, and consider long-term yield potential in this balanced supply environment.

Current competition

FHB market share: 17.82% • Government scheme impact

📊 Our broker perspective

Market snapshot: The Australian property market presents a complex landscape with stable interest rates and balanced supply. However, affordability remains low (51.1% of income), lending risk is elevated due to high LVRs, and competition for first home buyers is strong.

Key considerations: All buyers should closely monitor stable interest rates against persistent low affordability. High lending risk necessitates strong financial planning and robust loan serviceability. Secure pre-approval to understand your borrowing capacity and navigate balanced supply conditions effectively for market timing.

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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