First-home buyers in Australia face some of the toughest conditions in decades. Saving for a deposit takes longer than it did for earlier generations, and mortgage serviceability has been stretched by the sharp rise in interest rates through 2022 and 2023. Even so, more first-home buyers entered the market in the past year than was typical during the 2010s, showing that many are still finding ways to buy.
Saving for a deposit remains a major barrier. A 20% deposit is a traditional benchmark, but most first-home buyers purchase with less. On average, it takes nearly six years of saving for a median priced home. South Australia presents the highest hurdle, with more than seven years of saving needed due to rising prices and lower household incomes. Reserve Bank of Australia data shows almost three-quarters of first-home buyers enter the market with less than a 20% deposit, often with an average loan-to-value ratio of 85%.
Buyers frequently use government schemes, Lenders Mortgage Insurance, or guarantor loans to bridge the
Government programs are central to supporting first-home buyers. The Federal Home Guarantee Scheme allows eligible buyers to purchase with as little as 5% saved, and upcoming changes will remove income caps and increase property price limits. The new Help to Buy shared equity scheme enables buyers to contribute deposits as small as 2%, with the government holding a stake in the property.
Housing affordability remains a pressing issue. A typical first-home buyer household can afford the mortgage on just 17% of homes recently sold, compared with 33% for existing owners. Servicing a median-priced home now takes a larger share of income than at almost any time since the 1990s. Conditions are gradually improving as the Reserve Bank cuts rates, but affordability remains historically tight, particularly for younger buyers earlier in their careers.
Location choices show the impact of these pressures. In Sydney, first-home buyers focus on more affordable western and southwestern suburbs, including Mount Druitt, Parramatta, Liverpool, Blacktown, and Campbelltown. In Melbourne, southeast and western suburbs are popular, with Dandenong, Maribyrnong, and Wyndham seeing the highest search activity. Outer Brisbane areas such as North Lakes, Springwood–Kingston, and Forest Lake–Oxley are also in high demand. Many buyers choose apartments or semi-detached homes, which make up about one-third of purchases in this group.
Looking ahead, home prices are expected to rise across Australia through 2025 and into 2026. Ongoing interest rate cuts are expected to improve borrowing capacity, but affordability challenges will persist. Affordability has improved slightly in most capital cities, but it remains far tighter than historical norms. Increasing the supply of housing is essential, and governments at all levels are now prioritising policies to support first-home buyers.
Read full report https://rea3.irmau.com/site/pdf/a09ee164-1da5-4c41-8a25-698cff1cb0ce/PropTrack-CommBank-FirstHome-Buyer-Report-2025.pdf?Platform=ListPage