First-home buyers today are facing challenging conditions. Saving for a deposit takes longer than it did for previous generations of first-home buyers, and with the rapid rise of interest rates in 2022 and 2023, mortgage serviceability is at levels last seen three decades ago.
Even so, there were more first-home buyers in the past year than was typical during the 2010s, indicating that first-home buyers are finding ways to buy despite these challenges.
Taking advantage of government grants, low-deposit schemes, and Lenders Mortgage Insurance can enable first-home buyers to overcome the deposit hurdle and buy sooner. Buying newly built or ‘rentvesting’ are also strategies some are implementing to overcome challenging affordability.
Having flexibility on the location and type of dwelling can also provide opportunity for first-home buyers. These buyers typically look at more affordable suburbs, and at apartments, to make the most of their mortgage serviceability.
The good news for first-home buyers is that mortgage rates are falling and are currently expected to decrease further across this year. While home prices are rising, lower mortgage rates will help put more homes within reach of first-home buyers.
Read the report here: PropTrack-CommBank First Home Buyer Report
Difficult rental market conditions are likely encouraging capable renters to move into homeownership sooner than they might have otherwise. Recent government policies aimed at helping first-home buyers may have also enabled more to enter the market, despite challenging affordability conditions.
The two key factors first-home buyers face are:
Read the report here: PropTrack-CommBank First Home Buyer Report
While a 20% deposit is a typical target for many buyers, it is not crucial and most first-home buyers purchase with a smaller deposit.
An average income household would need to save for the equivalent of 5.9 years to save a 20% deposit for a median-priced home.
This hurdle – which has increased further in the past 12 months as home prices have grown – is substantially higher than it was for previous generations of home buyers and is an important part of why homeownership rates have been falling among younger households. Most younger households simply have not been earning for long enough to have saved such a large deposit.
For more information, including how first-home buyers can overcome the deposit hurdle read the full PropTrack-CommBank First Home Buyer Report.
The surge in mortgage rates between 2022 and 2023 has pushed housing affordability to its lowest level on our records for households of all incomes. While mortgage rates have come down a little over 2025, home prices have also been growing, meaning affordability remains around those lowest-ever levels.
This is especially true for first-home buyers, as they are typically younger than existing homeowners, earlier in their career and earn lower incomes. This means that housing affordability is even more challenging for prospective first-home buyers than it is for existing owners.
A typical-income prospective first-home buyer household (defined as one aged 25-39 and renting) earns $129,000. In the past year, they could afford to service the mortgage on just 17% of homes that were sold – the lowest on our records since 1995. That compares to 33% for existing owners with a mortgage. Similarly, the share of income needed to service a mortgage for a median-price home is around the highest levels seen since the 1990s, though has started to ease as the RBA has cut rates.
Fortunately for first-home buyers, conditions are likely to improve. The RBA has started cutting interest rates and further cuts are expected. This will reduce mortgage costs and start to help make a larger share of homes more affordable, even as home prices are expected to continue to grow this year.
For more on how first-home buyers are navigating affordability challenges, read the full PropTrack-CommBank First Home Buyer Report.
The most popular areas for first-home buyers to be searching are overwhelmingly in Melbourne.
Four of the top five first-home buyer hotspots – areas with the highest concentration of first-home buyers searching relative to other buyers – are located in Melbourne, with almost twice as many first-home buyers as is typical across Australia. Of the top 20 areas, nearly half are in Melbourne’s outer suburbs.
The over-representation of first-home buyers across Melbourne is consistent with Melbourne’s relative affordability compared to other major capitals. A median-priced home in Melbourne is now cheaper than in Adelaide, Brisbane or Perth, following very strong growth in those cities over the past five years. While this in part reflects differences in the types of homes across these cities, even just comparing detached houses in Melbourne to those in Brisbane, the median price is lower. It is also consistent with a much higher share of Melbourne homes falling under the price caps for the Federal Government’s Home Guarantee Scheme that have applied over the past couple of years.
This preference is backed up in new lending data from the Australian Bureau of Statistics; Victoria is seeing the highest share of new loans going to first-home buyers among the states and territories.
Record-low mortgage rates and favourable mortgage affordability conditions in 2020 and 2021 allowed a near-record number of first-home buyers to enter the market.
But the rapid increase in interest rates in 2022 and 2023 saw mortgage costs surge and housing affordability deteriorate, particularly for renters looking to buy.
The good news is this picture is beginning to improve. Mortgage rates have started falling, down 0.75% from their peak already, and are likely to fall further this year. This will lower mortgage costs for first-home buyers, improving housing affordability by making the mortgage on more homes affordable for first-time buyers. At the same time, lower mortgage rates will also be a tailwind for home prices, which are expected to grow this year. This will continue to make saving a deposit challenging.
Read the report here: PropTrack-CommBank First Home Buyer Report
