Should you buy property in Australia - 2025?

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+9.40%

$725K

Average home loan size

6-month change

Previous: $662K

+3.63%

5.3%

High-risk debt ratios

quarterly change

Previous: 5.1%

+7.52%

44,119

Housing completions

2025-Q3

Previous: 41,034

+0.50%

4.1%

RBA cash rate

6-month change

Previous: 3.6%

Mahendra

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 & ValuesABS Average Weekly Earnings

📊 What's happening?

Look, Australian housing has become considerably less affordable over the last decade.
The price-to-income ratio soared from 7.
3x to an expected 9.
2x by 2025.
This 26% increase clearly shows house price growth has far outstripped income gains, making homeownership a bigger stretch for many.
Key numbers:
2014: 7.3x income
2025: 9.2x income
+26% increase

🎯 Impact on buyers

Practically, this means aspiring homebuyers are facing a much tougher uphill battle.
You'll need to save for significantly longer for a deposit, and your mortgage repayments will consume a larger chunk of your income than ever before.
It's simply harder to get into the market.

💡 Key insight

This data vividly highlights a worsening affordability crisis. Australian house prices are growing at an unsustainable rate compared to average incomes, indicating a deeply challenging market environment for buyers.

Practical advice:
Given these tough conditions, rigorous budgeting is crucial. Explore properties in more affordable fringe areas, or consider alternative ownership models. Professional financial advice is also more important than ever to navigate this landscape effectively.

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.

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Will rising interest rates crash the property market?

Rates rose from 0.1% to a peak of 16.75%, then dropped to 4.1%. 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

From 2025-Q1 to 2025-Q3, rates eased from 4.1% to 3.6%, driving lending from $87.1B to $98.9B. The subsequent cash rate increase to 4.1% in 2026-Q1 coincided with a sharp drop in reported lending, highlighting market sensitivity to rising rates.
The market initially showed resilience, with lending at 4.35% rising from $76.1B (2024-Q1) to $87.7B (2024-Q4). Yet, after rates eased and then climbed back to 4.1% by 2026-Q1, lending volumes stopped, indicating a very sensitive reaction to renewed rate hikes.
With the cash rate now at 4.1% and recent upward shifts, buyers must prioritize affordability. Secure pre-approvals, explore competitive fixed-rate options if available, and ensure significant financial buffers to withstand potential future rate adjustments.
Lending boomed to $98.9B by 2025-Q3 when rates were 3.6%. With rates now at 4.1% and rising, prudence is key. Consider waiting for consistent rate stability or confirmed downward trends before making a purchase.

Is there really a housing shortage, and where?

With 242k+ migrants arriving annually but only 185k dwellings completed, here's the real supply-demand story.

185k
Mean dwellings completed/year
242k
Mean net migration/year
+1.3M
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, despite a 1.35 million cumulative dwelling surplus since 2012, significantly impact supply. High Net Overseas Migration (NOM) like 538,340 in 2023, drastically shrinks the annual dwelling surplus (to 13,841), intensifying competition for housing despite overall long-term oversupply.
Despite a 1.35 million cumulative surplus since 2012 from average annual completions of 185,238, recent migration surges (e.g., 538,340 NOM in 2023) reveal short-term capacity strain. The 2023 annual surplus was only 13,841 dwellings.
A 1.35M cumulative surplus since 2012 shows long-term capacity. However, recent high migration shrinking the annual surplus (e.g., 13,841 in 2023) creates immediate market tightness. This fuels rental growth and buyer competition, despite the overall cumulative oversupply.
With 1.35M cumulative surplus since 2012, long-term investment is key. While migration causes annual supply tightening, avoid reactive short-term timing. Focus on sustained value, recognizing overall historical oversupply.

Are first home buyers being pushed out?

FHB market share rose from 13.3% (2016) to 18.9% (2025). Here's the complete picture.

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18.86%
Current FHB market share
27.6%
Peak FHB share
+5.59%
Change since 2016
$20B
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 27.6% in 2020-Q3/Q4, but has since declined to 18.86% by 2025-Q4. This represents an 8.74 percentage point fall from its peak. While recent policies aim to assist, this trend indicates that FHBs continue to face headwinds, preventing a return to peak participation despite support.
Investor market share, currently 39.69% (2025-Q4), is nearly double the FHB share of 18.86%. This contrasts sharply with 2020-Q3, when FHB share was 27.6% and investor share was 24.47%. High investor activity, despite policy support for FHBs, indicates intense competition for available properties.
FHB activity peaked in 2020-Q3/Q4 (27.6% share) during a dip in investor presence (24.47%). Since then, FHB share has consistently declined, dropping to 18.86% by 2025-Q4, while investor activity has largely rebounded, illustrating a clear inverse relationship and shifting market dynamics.
With FHB share at 18.86% (2025-Q4) and investor share at 39.69%, FHBs face significant competition. While government schemes offer aid, the current market dynamics suggest a cautious approach. FHBs should be well-prepared and flexible to secure properties amidst strong investor demand.

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

In Q2 2025, high-risk LVR 90-95% was 4.55%, and LVR 95%+ was 2.16%. The combined 6.71% marks a significant reduction from 11.52% in Q4 2020. This trend indicates improved collateral buffers and decreased exposure to very high LVR lending patterns.
Total interest-only lending was 21.24% in Q2 2025, driven by investment loans at 14.43%. Owner-occupied IO loans reduced to 5.97%. This sustained level, particularly for investors, maintains repayment risk, especially under ongoing interest rate increases.
High LTI (6x+) lending reduced to 3.10% and high DTI (6x+) lending decreased to 5.47% by Q2 2025. This significant decline from Q4 2021 peaks (11.00% LTI 6x+, 24.33% DTI 6x+) reflects improved borrower capacity and lower stress indicators in new lending.
High LVR and income multiple risks have declined. Yet, 21.24% interest-only lending (Q2 2025), largely for investors, persists. Borrowers should prioritize principal reduction. Market stability shows improvement, but vigilance remains crucial amidst rate environment.

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
4.1%
RBA Cash Rate
Balanced Supply
18.86%
FHB Market Share
High Risk
31.16%
High LVR Lending

First home buyers

First home buyers benefit significantly from the 5% Deposit Scheme, offering no LMI and unlimited spots. Single parents can utilize a 2% deposit option. Despite high FHB competition, these government schemes substantially reduce entry barriers, making this an opportune time to explore property acquisition with lower upfront costs.
Government support available
5% deposit scheme with no income caps • No LMI • Unlimited spots

Property investors

Property investors should acknowledge a market with stable rates and moderate affordability, yet high lending risk and strong FHB competition. Emphasize rigorous due diligence on property fundamentals and adopt a conservative leverage strategy. Focus on growth potential and strong rental yields to navigate current dynamics effectively.
Current competition
FHB market share: 18.86% • Government scheme impact

📊 Our broker perspective

Market snapshot: The Australian property market exhibits moderate affordability and stable interest rates with balanced supply. However, notable factors include high lending risk due to significant high LVR lending and strong competition from first home buyers, shaping current market dynamics and requiring careful consideration.
Key considerations: Regardless of buyer type, assess personal financial capacity meticulously, considering moderate affordability and stable interest rates. Evaluate long-term interest rate stability and individual risk tolerance. Critically review lending terms, particularly concerning higher LVRs, to ensure a sustainable and informed property investment 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

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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