Should you buy property in Australia - 2026?

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+1.03%

$727K

Average home loan size

6-month change

Previous: $720K

-4.62%

27.5%

High-risk debt ratios

quarterly change

Previous: 28.8%

-0.29%

43,666

Housing completions

2026-Q1

Previous: 43,795

+0.50%

4.6%

RBA cash rate

6-month change

Previous: 4.1%

By Mahendra Duddempudi & Vidhu Bajaj

14 Jul 2026

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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 (2015-2026)

Median house price
Average annual income

Based on ABS data to May 2026

ABS Housing Prices & Values ABS Average Weekly Earnings

📊 What's happening?

ABS data shows Australian housing has become substantially less affordable.

The price-to-income ratio rose from 6.

9 times in 2015 to 9.

3 times in 2026, a 35% increase.

House prices grew 81%, while incomes rose 34%.

The ratio is now unchanged from 2025, but remains near its highest level.

Key numbers:

2015: 6.9x income

2026: 9.3x income

+35% increase

🎯 Impact on buyers

Buyers need more income, savings and borrowing capacity to purchase the same type of home.

Larger loan sizes can mean higher repayments and greater exposure to interest-rate changes.

Many households may need to delay buying, choose a cheaper suburb, buy a smaller property or rely on two incomes.

💡 Key insight

Housing costs have outpaced earnings by a wide margin. The ratio’s rise to 9.3 times income shows affordability pressure is structural, not just a short-term result of recent price movements.

Practical advice:

Set a firm borrowing limit based on repayments you could manage if rates rose. Seek pre-approval, compare lenders and check eligibility for the First Home Guarantee and relevant state schemes. Consider location and property compromises before stretching 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 4.6%, then dropped to 4.6%. Here's exactly what happened to buyer demand and lending volumes through the complete cycle.

2026 vs 2025

Quarterly home lending

$97.6B↑ +7%

2026 Q2

from $91.4B
in 2025 Q2

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 Jun 2026

📊 Rate cycle analysis

During the easing phase from 2024-Q4 to 2025-Q3, the RBA cash rate fell from 4.35% to 3.6%. Lending increased from 86,492 in 2024-Q4 to 106,630.3 in 2025-Q4, up 23.3% across four quarters.

The market is rate-sensitive but not paralysed. After the RBA resumed tightening, lending fell from 106,630.3 in 2025-Q4 to 97,647.9 in 2026-Q2, down 8.4%, yet remained 49.0% above 2023-Q1.

Earlier tightening produced a sharper response: lending fell from 93,366.1 in 2022-Q1 to 65,520.3 in 2023-Q1, down 29.8%, as the cash rate rose from 0.1% to 3.6%. At 4.6% now, stress-test repayments carefully.

With the RBA at 4.6% in 2026-Q3 and lending down 5.2% in 2026-Q2, buyers with capacity can negotiate now. Buyers stretched by repayments should wait for clearer rate and lending stabilisation.

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

Based on ABS data to Mar 2026

📊 Supply-demand gap analysis

At the 0.3-dwellings-per-migrant assumption, 2014-2026 completions exceed migration-driven demand by a cumulative 1,438,684 dwellings. The strongest pressure arrived in 2023: 538,340 NOM implied 161,502 dwellings, against 175,855 completions, leaving a 14,353 dwelling surplus.

Annual completions fell from 217,867 in 2018 to 172,451 in 2025, while 2025 NOM implied 91,671 dwellings. Completions still exceeded that requirement by 80,780. The 2026-Q1 count is 43,666, so annual capacity remains incomplete.

Migration-led demand alone does not evidence a national supply deficit: cumulative surplus is positive, despite narrow margins in 2023 and 2024, when surpluses were 14,353 and 48,510. Prices and rents can still diverge by city, dwelling type and tenure because total demand is excluded.

Track completions, construction costs and NOM together. The 2025 surplus provides a buffer, but declining output and elevated migration demand favour scarce, well-located stock over broad national assumptions.

Are first home buyers being pushed out?

FHB market share rose from 13.3% (2016) to 19.8% (2026). Here's the complete picture.

2026 vs 2025

First home buyer market share

19.8%↑ +0.5pp

2026-Q2

from 19.4%
in 2025-Q2

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19.84%

Current FHB market share

27.6%

Peak FHB share

+6.57%

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 Jun 2026

📈 First home buyer market analysis

FHBs represented 19.84% of housing lending value in 2026-Q2, up from 17.63% in 2025-Q3 but below the 27.60% peak in 2020-Q4. Government guarantee support may be assisting recovery, while affordability keeps participation below its peak.

Investors captured 38.02% of housing lending value in 2026-Q2, versus FHBs’ 19.84%. Investor lending was $37.12 billion, almost double FHB lending of $19.38 billion, leaving buyers competing against stronger established demand.

FHB share fell from 27.14% in 2021-Q1 to 18.82% in 2022-Q2 as RBA cash-rate changes reduced borrowing capacity. It recovered to 22.23% in 2023-Q2, then remained volatile around 19%-21%.

Eligible buyers should test borrowing capacity against RBA-sensitive repayments, then compare the Home Guarantee Scheme, state grants and concessions. Low-deposit access can reduce upfront costs, but serviceability limits and investor competition still favour disciplined, flexible bidding.

How risky are today's property loans?

29.28% of loans are above 80% LVR, 24.24% are interest-only. Here's what this means for market stability.

2026 vs 2025

High-LVR lending (80%+)

29.3%↑ +1.2pp

Q2 2026

from 28.0%
in Q2 2025

29.28%

High LVR loans (80%+)

24.24%

Interest-only loans

28.3%

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 Jun 2026

📊 Lending risk analysis

In Q2 2026, 29.28% of term lending was at LVR above 95%, up from 18.49% in Q4 2020 and 27.54% in Q3 2025. Only 5.56% was below 80%, indicating concentrated deposit and property-value risk.

Interest-only lending reached 24.24% in Q2 2026, up from 18.53% in Q2 2020. Investment interest-only loans comprised 16.49%, versus 6.67% owner-occupied, concentrating refinancing and repayment risks among investors as rates reset.

DTI above six times was 28.30% in Q2 2026, while DTI between four and six times was 50.16% - 78.46% combined. LTI above six times was 3.49%, down from 11.00% in Q4 2021, but debt servicing remains stretched.

APRA buffers, responsible-lending requirements and capital controls support resilience, but the dataset classifies conditions as high risk. RBA rate settings remain a stress test. Borrowers need repayment margins; investors should limit leverage and refinancing exposure.

Market timing insights

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

Poorly Affordable

49.1%

of income for mortgage

Peak Rates

4.6%

RBA Cash Rate

Balanced Supply

19.84%

FHB Market Share

High Risk

29.28%

High LVR Lending

First home buyers

Eligible first home buyers may consider the Home Guarantee Scheme, including the lower-deposit option for eligible single parents, plus state grants and concessions. Compare repayments under current RBA settings, confirm serviceability, and avoid overstretching amid strong competition.

Government support available

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Property investors

Investors face high competition from first home buyers and elevated lending risk. Assess rental demand, vacancy rates, tax outcomes, buffers and likely cash flow under higher rates. Balanced supply may improve choice, reducing pressure to bid aggressively.

Current competition

FHB market share: 19.84% • Government scheme impact

📊 Our broker perspective

Market snapshot: As at September 2026, affordability remains strained, with housing costs at 49.1% of income. The RBA cash rate is at a 4.6% peak. Balanced supply limits urgency, while 29.28% high-LVR lending indicates elevated borrower risk.

Key considerations: Timing should reflect borrowing capacity, deposit size, fixed and variable loan comparisons, property quality, local supply and employment security. RBA rate changes may alter repayments, borrowing power and competition, so retain a prudent cash buffer.

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.

Written by

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.

Reviewed by

Vidhu Bajaj

Finance Editor

Vidhu is the Finance Editor at Bheja.ai. For more than nine years, she has been demystifying personal finance, covering everything from home loans and credit cards to insurance and investing for leading Australian comparison websites, including RateCity, Canstar, Finty, Credit Card Compare and HashChing.
Before focusing on consumer finance, Vidhu studied law, earning a Bachelor of Laws with a focus on human rights. She then spent more than four years in asset finance at Clifford Chance, working across the firm's India, London and Hong Kong offices on transactions ranging from aviation finance to vessel finance.
When she's not making finance simple for Aussies, you'll find her reading about spirituality, technology and investing, spending time in the garden, or hanging out with her pets.

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