Should you buy property in Australia - 2025?

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+2.17%

$674K

Average Home Loan Size

6-month change

Previous: $660K

-8.78%

5.1%

High-Risk Debt Ratios

quarterly change

Previous: 5.6%

-4.41%

43,395

Housing Completions

2025-Q1

Previous: 45,396

-0.50%

3.6%

RBA Cash Rate

6-month change

Previous: 4.1%

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 & ValuesABS Average Weekly Earnings

📊 What's Happening?

Australian housing affordability has significantly worsened since 2014, with the price-to-income ratio jumping from 7.
4x to 9.
7x.
This 31% increase means homes now cost much more relative to earnings, although it has stabilized at a high level since 2021, indicating persistent unaffordability.
Key Numbers:
2014: 7.4x income
2025: 9.7x income
+31% increase

🎯 Impact on Buyers

Practically, this means prospective homebuyers face a much tougher climb.
Saving for a deposit requires significantly more time and effort, and mortgage repayments will eat up a larger chunk of household income, making homeownership a distant dream for many.
It's a huge barrier.

💡 Key Insight

The market clearly demonstrates a long-term structural imbalance where house price growth vastly outpaces income growth, creating a sustained affordability challenge despite recent stability.

Practical Advice:
Given these tough conditions, buyers should prioritize aggressive savings, explore all available government assistance programs, and seriously consider alternative locations or property types.

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

During the 7 quarters of aggressive rate rises (Q2 2022 - Q4 2023), average lending fell to $72.6B/quarter. However, over the 6 recent quarters of stabilization and cuts (Q1 2024 - Q2 2025), average lending rebounded to $83.9B/quarter.
The market proved sensitive to rate hikes, with lending plunging 29.4% from Q1 2022 ($93.7B) to Q1 2023 ($66.1B). However, it displayed resilience, notably increasing 9% in Q4 2023 despite a rate rise, and has continued recovering during 2025's rate cuts.
With current rates declining to 3.6%, buyers should assess their borrowing capacity carefully. Securing a pre-approval provides clarity. Monitor evolving lending conditions and market confidence as rates continue to fall, focusing on long-term affordability.
With rates declining to 3.6%, now may be an opportune time. Consider buying as lending volumes recover but before widespread price surges, which often follow sustained rate cuts. Personal financial readiness is key.

Is There Really a Housing Shortage, and Where?

With 220k+ migrants arriving annually but only 166k dwellings completed, here's the real supply-demand story.

166k
Mean Dwellings Completed/Year
220k
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, though high in 2023 (535,520) and 2024 (445,640), have contributed to a cumulative surplus of 1.4 million dwellings against migration-driven demand since 2012. This indicates historical capacity has exceeded this specific demand.
Current dwelling completions (e.g., 175,481 in 2023) are significantly below peak levels (217,864 in 2018), leading to a rapid reduction in the cumulative supply surplus, narrowing to 14,825 in 2023 due to record migration.
While a historical cumulative surplus of 1.4 million dwellings exists, recent high migration levels mean annual completions are currently struggling to meet immediate migration-driven demand, potentially driving localized market pressures.
Despite a 1.4M cumulative surplus since 2012, recent high migration has significantly tightened the annual supply gap. This indicates a challenging short-term market. Strategic timing is crucial for participants considering current demand pressures.

Are First Home Buyers Being Pushed Out?

FHB market share rose from 13.3% (2016) to 19.6% (2025). Here's the complete picture.

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19.61%
Current FHB Market Share
27.64%
Peak FHB Share
+6.34%
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 27.64% in 2020-Q4, declining to 19.61% by 2025-Q2. This 8.03% decrease from peak suggests challenges persist despite expanded government schemes, though it remains above the 2017-Q1 low of 11.61%.
Investor competition has surged, with investor share rising from 23.79% (2020-Q4, FHB peak) to 37.55% (2025-Q2). This significant increase, alongside a FHB market share drop to 19.61%, indicates strong investor pressure impacting FHB access despite policy support.
FHB market share peaked at 27.64% (2020-Q4), declining to 19.61% (2025-Q2) as investor share surged to 37.55%. This inverse trend highlights a market where growing investor activity impacts first home buyer participation.
With current FHB share at 19.61% and high investor competition (37.55%), FHBs should leverage expanded government schemes (e.g., 5% deposit, no LMI). Strategic planning is crucial to navigate market pressures effectively.

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-LVR lending (90%+) has notably decreased from 2020 peaks (11.34%) to 6.62% in Q1 2025. This includes 4.56% at 90-95% LVR and 2.06% above 95% LVR. The trend indicates a lower concentration of high-risk loans, bolstering resilience.
Total interest-only lending stands at 19.95% in Q1 2025, with investor loans at 13.50% and owner-occupied at 5.75%. While total IO is near recent highs, owner-occupied IO has declined, shifting repayment risk concentration towards investors, impacting stability.
High LTI (6x+) and DTI (6x+) lending significantly reduced from 2021 peaks (10.80%, 23.88%) to 2.97% and 5.16% in Q1 2025. This indicates improved borrower capacity and reduced stress.
Despite a 'decreasing' risk trend, the market is 'high_risk.' APRA measures improved lending quality, but rising rates still pressure borrowers. Maintain caution, prioritize serviceability, and monitor market indicators.

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
19.61%
FHB Market Share
High Risk
30.33%
High LVR Lending

First Home Buyers

First home buyers can leverage the 5% deposit scheme (2% for single parents) with no LMI or income caps, reducing entry barriers. Despite high FHB competition, these significant government supports offer a timely advantage for eligible buyers to enter the market.
Government Support Available
5% deposit scheme with no income caps • No LMI • Unlimited spots

Property Investors

Investors face a market with stable rates and balanced supply, but high lending risk (30.33% high LVRs) warrants caution. Strong FHB competition also impacts entry points. Careful due diligence, robust financial planning, and risk assessment are crucial for strategic investment decisions.
Current Competition
FHB market share: 19.61% • Government scheme impact

📊 Our Broker Perspective

Market Snapshot: The Australian property market sees stable interest rates amid low affordability (50.4% income). Supply is balanced, but lending risk is high with 30.33% high LVRs. First home buyer competition is notable at 19.61% market share.
Key Considerations: All buyers should critically assess low affordability (50.4% income) despite stable interest rates. High lending risk (30.33% high LVRs) means robust financial health and a clear understanding of borrowing capacity are paramount for navigating current market conditions 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.

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