Homeownership rates in Australia have been falling among young households for decades.
Three quarters of households born in the 1940s and 1950s were homeowners before they reached 40 years old.
For the generation born in the early-to-mid-1980s (the most recent cohort to reach this age), just under 60% have moved into homeownership.
This story is even starker for homeownership before 30. For those born prior to 1960, more than half had moved into homeownership by age 30.
In contrast, just one-third of households born in the 1990s have managed to buy a home before they turn 30.
A direct consequence of declining homeownership among younger households is that the typical first-home buyer is now older.
Three decades ago, a first-home buyer was most likely to be aged 25-29. Today, a first-home buyer is more likely to be 30-34.
And while there are still many first-home buyers aged 25-29, there is an increasingly large number aged in their mid-thirties to mid-to-late forties – something that was far less common three decades ago.
So why has this happened?
There are some possible demographic explanations such as more people undertaking tertiary study and delaying household formation, or people starting families later in life.
These probably explain some of the decline, though causality could also run the other way: people choose to delay starting a family because they buy a house later.
But the big economic explanation is the deposit burden: saving a deposit is a critical barrier to homeownership. And this burden has increased substantially over the past few decades.
To highlight how substantial the deposit burden is, an average income household would need to save for the equivalent of just under six years to accumulate a 20% deposit for a median-priced home - assuming they saved 20% of their pre-tax income, a high rate of saving many households would not meet.
Affordability more broadly cannot explain the decades-long decline in homeownership. While affordability is very challenging today - because of rapid increases in interest rates in 2022 and 2023 - it was not during the 2010s.
Affordability – how easily a household can service a mortgage – is mostly a function of interest rates, which are cyclical.
These two facts – declining homeownership and structurally higher deposit burdens – are the motivation behind recent government policies targeting first-home buyers, notably the expanded Australian Government 5% Deposit Scheme.
By reducing the deposit a first-home buyer requires, the government hopes to help some first-home buyers buy sooner.
And we do see that in the data: first-home buyers that buy with a smaller deposit (and therefore, a higher loan-to-valuation ratio) tend to be younger.[1]
However, most first-home buyers already bought with a smaller than 20% deposit: in fact almost three-in-ten buy with a deposit of 10% or less.[2]
This government support will make it easier for first-home buyers to buy with a smaller deposit (since they won’t have to pay for Lender’s Mortgage Insurance), and will bring forward first-home buyer demand.
We may already be seeing that: loans to first-home buyers were up in the December quarter, with the most first-home buyer loans since March 2022.[3] How that continues to evolve this year will be one of the key themes to watch for 2026.
[1] Again, causality runs both ways here – an earlier purchasing first-home buyer will have, by definition, have had less time to save and accumulate wealth, and so likely has less of a deposit.
[2] Alfonzetti M (2022), ‘Are first home buyer loans more risky’, https://www.rba.gov.au/publications/bulletin/2022/mar/are-first-home-buyer-loans-more-risky.html
[3] December covered the first three months of the expanded scheme
