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%

Mahendra Duddempudi

CTO & Head of Research

Updated on 01 Oct 2025

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?

The price-to-income ratio has significantly worsened, jumping 31% from 7.
4x in 2014 to 9.
7x by 2025.
This shows housing costs have outpaced income growth drastically, with house prices surging 79% against a 36% rise in incomes, making homeownership much harder to achieve over the past decade.
Key numbers:
2014: 7.4x income
2025: 9.7x income
+31% increase

🎯 Impact on buyers

Practically, this means potential buyers need to save for much longer and will likely face significantly larger mortgage repayments relative to their earnings.
Getting onto the property ladder is considerably more challenging than a decade ago, often requiring substantial deposits and higher income multiples for financing.

💡 Key insight

Despite recent minor fluctuations, the market reveals a persistent structural affordability challenge. House prices have stabilized recently but remain historically detached from income growth.

Practical advice:
Focus on saving aggressively for a substantial deposit. Explore government assistance programs, and be prepared to compromise on location or property size to enter the market. Consider professional financial advice.

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 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

After rates peaked at 4.35% in Q4 2023, subsequent cuts to 3.6% by Q3 2025 have already spurred lending. Volumes increased from $74.97B (Q4 2023) to $87.66B (Q2 2025), reflecting renewed borrower confidence. This positive trend shows lower rates are indeed stimulating demand.
The market showed significant resilience. Despite peak rates (4.35% from Q4 2023 to Q4 2024), lending volumes increased from $74.97B to $86.97B, suggesting demand absorbed high costs. Recent rate cuts continue this upward trend, demonstrating robustness.
With rates decreasing from 4.35% to 3.6%, borrowing capacity is improving. Secure pre-approval now to understand your budget. Factor in potential future rate movements, but current trends are favourable for buyers entering the market.
The current rate environment (3.6%) and upward lending trend suggest an opportune time. While rates may stabilise, substantial further cuts are less likely. Acting now leverages improving affordability and market stability.

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 significantly influence housing demand, with net overseas migration driving demand at 0.3 dwellings per migrant. Cumulatively since 2012, Australia has a surplus of 1.4 million dwellings relative to this migration-driven demand, suggesting long-term capacity to absorb migrant inflows.
Despite high recent migration (e.g., 535,520 in 2023), cumulative dwelling completions have exceeded migration-driven demand by 1.4 million since 2012. However, the annual surplus in 2023 was only 14,825 dwellings, indicating completions are currently barely outpacing high migration-driven pressures.
The cumulative 1.4 million dwelling surplus against migration-driven demand implies underlying market resilience. While recent high migration creates short-term pressure, this analysis suggests other factors contribute more to any overall housing shortage beyond just migrant accommodation needs.
With a cumulative 1.4 million dwelling surplus over migration-driven demand since 2012, long-term market fundamentals for absorbing migration are strong. However, recent tight annual surpluses (e.g., 14,825 in 2023) indicate short-term pressure points for immediate entry.

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, likely boosted by pandemic-era stimuli. It has since declined to 19.61% by 2025-Q2. This represents an 8.03 percentage point drop from its peak, but remains above its lowest point of 11.61% in 2017-Q1, indicating sustained interest despite shifts.
Investor competition significantly impacts FHBs. At FHB's 2020-Q4 peak (27.64% share), investor share was 23.79%. Currently, investor share stands at 37.55% (2025-Q2), while FHB share is 19.61%. This shows increased investor dominance, making FHB entry more challenging despite support policies.
FHB activity shows a strong surge post-2019, peaking in late 2020 (27.64%). This pattern correlates with stimulus measures and lower rates. Since 2021, FHB share has generally declined, stabilizing around 19-21%, while investor share rebounded, indicating shifting market dynamics.
Despite current investor competition (37.55% share), FHB market share at 19.61% isn't at historic lows. With expanded government schemes like the 5% deposit, FHBs should strategically leverage available support, possibly targeting properties with less investor interest.

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

LVR distribution in Q1 2025 shows 30.33% of new lending above 80% LVR, with 6.62% above 90% LVR (4.56% at 90-95%, 2.06% at 95%+). This reflects a decreasing trend in high-LVR lending since peaks in 2020/2021, indicating APRA's macroprudential measures are moderating risk.
Interest-only lending stands at 19.95% in Q1 2025 (5.75% owner-occupied, 13.50% investment). While investment IO remains significant, total IO is near recent highs. This level, amid rising rates, poses repayment risk to market stability as borrowers transition to principal and interest.
High loan-to-income (>6x LTI) is 2.97% and high debt-to-income (>6x DTI) is 5.16% in Q1 2025. These indicators have significantly decreased from 2021 peaks, reflecting reduced borrower stress due to serviceability assessments and APRA measures. This trend improves resilience.
Despite a 'decreasing' risk trend in some areas, the market stability assessment remains 'high_risk'. Borrowers should maintain robust serviceability buffers. Investors should exercise caution, focusing on credit quality, given sustained interest rates and affordability pressures.

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 government's 5% deposit scheme with no LMI, easing entry despite high market competition. Single parents have a 2% deposit option, significantly reducing initial capital requirements.
Government support available
5% deposit scheme with no income caps • No LMI • Unlimited spots

Property investors

Property investors should carefully assess high lending risk and a balanced supply environment. While FHB competition is strong, thorough due diligence on potential returns and financing structures is paramount in this market.
Current competition
FHB market share: 19.61% • Government scheme impact

📊 Our broker perspective

Market snapshot: The Australian property market faces low affordability and high lending risk, despite stable interest rates and balanced supply. First home buyer competition remains high, influencing market dynamics for all participants.
Key considerations: All buyers must consider persistent low affordability and high lending risk. Stable interest rates offer some certainty, but robust financial planning and a clear understanding of loan serviceability are essential for successful market entry.
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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