The Changing Landscape of Housing Affordability in Australia
Overview
The latest figures from the Domain First-Home Buyer Report 2026 reveal a significant shift in the Australian housing market, making it increasingly challenging for first-home buyers to secure their entry into homeownership. With rising entry-level prices eclipsing wage growth and diminishing affordability, many traditional pathways to homeownership are becoming less accessible. This summary explores the key findings of the report, highlighting the difficulties faced by first-home buyers across various Australian cities.
Deteriorating Affordability
Rising Prices vs. Stagnant Wages
Over the past five years, entry-level house prices have skyrocketed by 68%, while unit prices have increased by 30%. In stark contrast, wages have only grown by 21%, failing to keep pace with inflation, which rose by 23%. This widening affordability gap is making it increasingly difficult for young Australians to accumulate enough savings for a down payment.
Increased Deposit Requirements
The length of time required for first-home buyers to save a 20% deposit has increased across all major Australian cities. For instance, residents in Darwin—previously considered a more accessible market—now require approximately two years and seven months to save for an entry-level unit, a significant five-month increase over the past year. Meanwhile, in Sydney, this timeframe has ballooned to seven years and seven months. Brisbane has now overtaken other cities as the second most challenging market for first-home buyers.
Mortgage Repayments Consuming Income
The report indicates that mortgage repayments are consuming a significantly larger share of household income. On average, households across Australia spend around 48.9% of their income on repayments for entry-level houses, a surging figure that is up nearly 24 percentage points over five years. In the unit market, repayments account for roughly 30.9% of income.
Shifting Dynamics in Housing Markets
Declining Affordability of Units
Historically, units were viewed as the more affordable alternative for first-home buyers, serving as a stepping stone into homeownership. However, the report reveals that this advantage is diminishing. For the first time, Brisbane has surpassed Sydney, requiring a longer period to save for an entry-priced unit. In Adelaide and Perth, the gap between the time needed to save for a unit versus a house has narrowed significantly, complicating affordability further.
Broader Implications of Changing Affordability
As first-home buyers face rising barriers, the trend indicates that more individuals will remain renters for longer durations. This dynamic reinforces rental demand, drives down vacancy rates, and adds more pressure on housing supply. These conditions could potentially support rental growth and affect investment returns.
Moreover, if younger Australians continue to struggle to enter the property market, the overall process of buying, selling, upgrading, and downsizing may slow down drastically. Markets may become increasingly segmented and dependent on investor activity, leading to greater regulation and scrutiny from policymakers.
Challenges for Buyers
Financial Risks for First-Home Buyers
Dr. Nicola Powell, Chief of Research and Economics at Domain, highlights that first-home buyers are now facing more financial risks than ever before. Although interest rate cuts in 2025 provided some relief, they were insufficient to counterbalance years of rapid price growth and rising household debt. It is concerning that this affordability issue is no longer limited to major financial cities like Sydney; Brisbane, Adelaide, and Perth have also experienced significant price escalations, making them similarly difficult landscapes for new buyers.
Additional Initiatives and Strategies for Affordability
While government initiatives like the 5% Deposit Scheme and Help to Buy have made some headway in reducing saving timelines and improving mortgage serviceability, broader affordability challenges remain. This situation underscores that effective policy responses must address not just interest rates but also supply constraints and upfront costs.
Future Pathways and Conclusion
Australia’s housing affordability landscape is undergoing fundamental changes that extend well beyond just interest rates. The gap between what first-home buyers can save and the current costs of entry-level homes continues to widen, resulting in longer saving periods, increased repayments, and disappearing starter homes in several markets.
For investors, this evolving demand landscape presents both opportunities and risks. While cities where first-home buyers are increasingly locked out may show stronger rental markets, these regions may also become more vulnerable to policy changes and affordability pressures.
Moving forward, policymakers must rethink strategies for improving housing affordability in Australia. Without sustained initiatives aimed at increasing housing supply and addressing upfront and ongoing costs, many young Australians may find that homeownership remains perpetually out of reach. The need for urgent action has never been more pressing.
