Surging House Prices Challenge Australian First-Time Buyers

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Westpac's latest consumer sentiment survey confirms the upswing in property market confidence, with expectations of higher house prices and an improving sentiment that it’s a good time to purchase a home. CBA Associate Economist Lucinda Jerogin observes that since the RBA’s rate reductions started in February, lower-priced homes have appreciated faster—increasing by 4% compared to a 3% rise for higher-priced properties. This trend reversal highlights ongoing affordability issues, reducing purchasing power and directing more buyers towards affordable housing options.

Competition for budget-friendly homes is intensifying due to robust demand and limited supply, driving prices upward in this segment. The introduction of the Albanese government's 5% deposit scheme for first-time buyers, effective from 1 January 2026, is set to further bolster demand. Under this scheme, the government will guarantee 15% of the mortgage, allowing buyers to enter the market with only a 5% deposit and avoiding lenders’ mortgage insurance.

While this initiative aims to support first-time buyers, there is concern it may inadvertently increase property prices by heightening competition for entry-level homes, pushing purchase costs higher. The growing market pressures suggest that future buyers may face larger mortgage debts despite the scheme's potential to enhance initial housing affordability.

As demand-side measures like these continue to shape the market, the sector's ability to sustainably absorb and benefit first-time buyers remains a central concern, amid speculation that these policies might ultimately counteract affordability goals.

Published:Wednesday, 6th Aug 2025
Source: Paige Estritori

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