Are most first home buyers locked out of the property market?

For generations, “getting on the property ladder” was a realistic goal for young Australians with a secure job and a bit of saving discipline. In late 2025, that feels far less certain. House prices have surged, deposits now take a decade or more to save in most capitals, and many young buyers are competing with cashed-up investors and older downsizers.

So are most first home buyers effectively locked out of the market – or just forced to adjust what, where and how they buy?

The answer is nuanced: home ownership is still possible, but in many parts of Australia the traditional first home (a freestanding house in a capital city suburb) is now out of reach for the majority of first-timers.

1. How bad is affordability right now?

Multiple data sources show housing affordability is near, or at, record lows.

• A recent housing affordability report found that after years of price growth, it now takes more than a decade to save a standard 20% house deposit in most Australian capital cities. ABC

• Since the start of the pandemic in 2020, Australian home values have risen by about 47%, far outpacing wages.

• ANZ–CoreLogic modelling for September 2024 estimated that only around 10% of homes nationwide were affordable to a median-income household if they wanted to keep repayments below 30% of income – down from about 40% just two years earlier. Even households on the 75th-percentile income (around $172,000) could only comfortably afford half the market.

International comparisons aren’t flattering either:

• The Reserve Bank of Australia has noted an average price-to-income ratio around 5.5 nationally, already high by global standards.

• Other analyses that focus on the big capitals put the median price-to-income multiple closer to 9–10 times income, which ranks Australia among the most expensive housing markets in the world and roughly twice as expensive as the US on that measure.

Overlay elevated interest rates – the cash rate sitting in the mid-4s through 2024–25 – and you have a double squeeze: record prices plus high borrowing costs.

2. What’s happening to first home buyers in the data?

Despite the grim headlines, first home buyers haven’t disappeared – but they’re under pressure and being pushed to the margins of the market.

• ABS lending figures show new owner-occupier first home buyer loan commitments rose modestly (about 2–3%) in the September quarter of 2025, but from a low base after earlier rate hikes knocked many out.

• The National Housing Supply and Affordability Council reports that new lending to first home buyers remained relatively flat across 2024, with worsening serviceability and longer deposit-saving times putting a ceiling on how many can buy.

At the same time, investors have roared back:

• Investor loans now account for about 38–40% of all new home lending, the highest share on record.

• In NSW, investor lending has recently been growing faster than owner-occupier lending, widening the gap between those who already own property and those trying to get in.

When investors make up two in every five new loans, they compete directly with first home buyers for the same stock of “affordable” properties – older units, small houses in outer suburbs and regionals.

Regulators are starting to worry. The banking regulator, APRA, has announced from February 2026 it will cap the share of very high debt-to-income loans (DTI ≥ 6) at 20% of new lending – a move aimed at cooling risky borrowing, especially as prices surge again and investor credit grows strongly.

3. Deposits: the first and biggest wall

For most aspiring buyers, the deposit – not the mortgage – is the real barrier.

The Cotality report and other analyses show:

• Saving a 20% deposit on a median-priced house in a major capital now takes 10+ years for a typical household, assuming disciplined saving.

• In Sydney, the median house transfer price went from around $680,000 in 2014 to about $1.4 million by late 2024. Even a 10% deposit at that level is $140,000.

• Nationally, the median dwelling (houses and units combined) is approaching $1 million.

For renters, this saving task is compounded by high rents, which have also surged in recent years as vacancy rates fell to very low levels.

This is where many would-be buyers simply give up: they can service a loan on paper, but cannot realistically accumulate the deposit while paying steep rents and everyday living costs.

4. Government schemes: safety net or band-aid?

Federal and state governments have rolled out a suite of schemes to help first home buyers.

Federal programs

1. Australian Government 5% Deposit Scheme (formerly Home Guarantee Scheme)

   • Allows eligible buyers to purchase with just 5% deposit, with the government guaranteeing up to 15% of the loan so borrowers can avoid Lenders Mortgage Insurance (LMI).

   • Recently expanded to effectively unlimited places with higher property price caps, and income caps relaxed, to reflect surging prices.

   • By mid-2025, more than one-third of all owner-occupier first home buyers in several states were accessing a government guarantee.

2. Help to Buy shared equity scheme

   • From December 2025, eligible buyers in participating states can have the Commonwealth contribute up to 40% of the purchase price for new homes and 30% for existing homes in exchange for an equity stake.

3. Regional First Home Buyer Guarantee / First Home Guarantee

   • Support for regional buyers with low deposits, often stacked with state grants and stamp duty concessions.

State measures

• Various stamp duty exemptions or discounts for first home buyers, particularly in NSW, Victoria and SA.

• First home owner grants focused mainly on new builds, though the value and eligibility vary.

These programs undeniably help tens of thousands of people into the market each year. However, they don’t change the fundamental issue: too many people chasing too few homes. There is a risk that demand-side subsidies simply bid up prices further, particularly at the lower end of the market where first home buyers concentrate.

5. The supply crunch: 1.2 million homes, but can they be delivered?

Behind the affordability crisis is a chronic shortage of housing relative to population growth.

• The National Housing Accord aims to build 1.2 million new homes between mid-2024 and mid-2029, but recent ABS data show Australia is already more than 70,000 homes behind schedule, with dwelling approvals falling by 6.4% in October.

• Construction costs, labour shortages and builder insolvencies have all slowed new supply at exactly the time migration and population growth have surged.

As long as supply lags demand, prices will remain under upward pressure, and first home buyers – particularly those without family assistance – will bear the brunt.

6. Locked out of what, exactly?

When we ask whether first home buyers are “locked out”, it’s important to clarify what kind of home we’re talking about.

For many young Australians, the traditional benchmark was:

• A freestanding house

• On a full block

• Within commuting distance of a major CBD

In late 2025, that dream is genuinely out of reach for most first home buyers in Sydney, Melbourne, Brisbane, Canberra and increasingly Perth and Adelaide, unless:

• They receive substantial parental help (the “Bank of Mum and Dad”)

• They earn well above median income, or

• They are willing to take on very high debt levels relative to income.

However, if we broaden the definition of “getting in” to include:

• Smaller apartments or townhouses

• Outer-ring suburbs and commuter belts

• Regional centres with decent services and jobs

• Buying with siblings, friends or partners

then it’s more accurate to say many first home buyers are not fully locked out, but forced to compromise far more than previous generations.

Even property market data shows that more affordable outer regions – for example, Sydney’s outer west and south-west – are where prices are currently rising fastest as first home buyers and upgraders chase relative value.

7. The long-term consequences of a generation locked out

If a large share of younger Australians remain renters for life, there are serious economic and social implications:

1. Wealth inequality

   • Housing is the primary wealth engine for most Australian households. Those who own enjoy rising equity; those who don’t can be left behind.

2. Retirement security

   • Superannuation balances were designed with the assumption most retirees would own their home outright. Long-term renting in retirement dramatically increases poverty risk.

3. Household formation and fertility

   • International research links housing costs to delayed partnering, later child-bearing and lower fertility rates. High housing costs may be contributing to demographic shifts.

4. Labour mobility

   • If workers can’t afford to live near jobs, cities become more congested and productivity can suffer.

5. Social cohesion

   • A sense that “the system is rigged” in favour of older asset owners can fuel political discontent and inter-generational tension.

These are the stakes when we talk about first home buyers being locked out; it isn’t just about lifestyle, it’s about the structure of Australian society.

8. What would it take to change the picture?

Most experts agree that while grants and guarantee schemes can help individuals, system-level change requires focusing on supply and planning.

Policy discussions often centre on:

• Zoning reform and higher-density housing in well-located suburbs

• Faster planning approvals and better resourcing of state and local planning systems

• Incentives and support for build-to-rent and social/affordable housing

• Infrastructure investment to make outer-suburban and regional growth areas more liveable

• Tax settings – including negative gearing, capital gains tax discounts, and land tax – which shape investor behaviour and land use

None of these are quick fixes. They require multi-year, coordinated action between federal, state and local governments, as well as the private sector.

9. So – are most first home buyers locked out?

Taking the evidence together:

• Affordability is at or near record lows.

• Deposits now take a decade or more to save for a standard house in many cities.

• Investors are taking a record share of new loans, intensifying competition for entry-level stock.

• Government schemes help a significant minority, but they don’t fundamentally change the underlying price and supply dynamics.

• Supply targets are ambitious, but behind schedule.

That means:

Most first home buyers are effectively locked out of buying a typical family house in a major Australian city without help – but not completely locked out of home ownership altogether.

For many, the realistic path is:

• A unit or townhouse instead of a house

• An outer suburb or regional centre instead of an inner or middle ring suburb

• Co-purchasing and using government guarantee or shared-equity schemes

• A much longer and more disciplined savings journey than earlier generations faced

Whether that counts as “locked out” is partly a political and emotional judgement. But the numbers are clear: in 2025, the Australian housing ladder is steeper, narrower and more fragile than it has been in decades – and first home buyers are the ones clinging to the bottom rungs.

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