First home buyers caught between opportunity and risk as housing market shifts

They’re the centre of attention when it comes to housing policy.

First home buyers and their struggles to share in the generational wealth of their parents are the focus of government policies aimed at limiting the competition they face from investors in their quest for a home.

Record numbers of young people are opting to live at home for longer, as the affordability crunch proves too great.

A generation already fearing for the loss of graduate and entry-level jobs to artificial intelligence is now also contending with an unexpected side effect of stabilising, and in some markets falling, home values.

Young buyers who have taken the plunge are now facing the prospect of slipping into negative equity, while those still on the sidelines are watching cautiously.

New research highlights the depth of the challenge.

According to the 2026 Australian Consumer Trends Report from Insights Exchange, one in three Australians aged 18–29 still live with parents or in-laws.

Among parents with adult children at home, 63 per cent are providing financial support, a sharp rise from 53 per cent just a year earlier.

The report, based on a nationally representative survey of 959 Australians, paints a picture of structural rather than temporary financial pressure.

Just 9 per cent of respondents plan to save for a home deposit in the next five years, while 45 per cent say they would trade workplace flexibility for higher pay.

Women are bearing a disproportionate burden, with 45 per cent reporting a worsening ability to meet household expenses (compared to 35 per cent of men) and far lower levels of retirement preparedness.

“The old milestones such as moving out, buying a home, building financial security and retiring comfortably no longer feel achievable all at once,” said Nichola Quail, Founder and CEO of Insights Exchange.

At the same time, recent buyers are confronting new risks.

Forty-four per cent of Australians rate AI-driven job losses as major or extreme. And even oif they manage to get and hold a job, property price trajectories are also an issue to consider.

Commonwealth Bank’s latest forecasts, released in early June 2026, predict Sydney dwelling prices will fall 6 per cent and Melbourne 7 per cent over the course of the year.

Canstar analysis shows that first home buyers who purchased at the upper limits of the federal Home Guarantee scheme with a 5 per cent deposit could be left with next-to-no equity, or even in negative equity, in Melbourne by year-end, despite making principal and interest repayments.

A buyer of a $1.5 million Sydney property with a 5 per cent deposit would retain just 0.2 per cent equity by December, while the equivalent Melbourne buyer could slip into negative equity of around $8,000. In contrast, stronger markets such as Perth (+12 per cent) and Brisbane (+8 per cent) continue to deliver gains for recent entrants.

Investor implications

For experienced property investors, these developments carry several important messages.

First, the policy emphasis on first home buyers is unlikely to ease. Government initiatives, including the Home Guarantee scheme, continue to support low-deposit entry, but the combination of higher interest rates and softening prices in Sydney and Melbourne is creating genuine risks for leveraged new entrants.

Second, the “sandwich generation” pressure identified in the Insights Exchange report, with 31 per cent of parents with young children also caring for elderly relatives, suggests sustained demand for larger family homes, but also potential upward pressure on rental markets as younger Australians delay independent living.

The divide between the eastern capitals and resource-driven markets in the west and north is sharpening.

Investors in Perth, Brisbane and Darwin are likely to see continued capital growth, while Sydney and Melbourne investors should prepare for a period of flat or modestly declining values before any recovery in 2027.

Government support continues

Despite the headwinds, targeted assistance for first home buyers remains a priority.

The federal government has now supported more than 300,000 Australians into home ownership through the 5 per cent deposit schemes.

In addition, new developments such as Australia’s first neighbourhood built exclusively for first home buyers, recently received a $50 million cash injection to accelerate delivery of much-needed stock.

That new neighbourhood will be located at Playford Alive in Munno Para, about 30 kilometres north of the Adelaide CBD. First home buyers will be given priority access to hundreds of new lots.

Ms Quail said Australians are no longer simply cutting back, they are recalibrating expectations about what stability and security now look like.

“This report shows Australians are still optimistic, but it’s becoming a far more pragmatic kind of optimism.

“People are making increasingly deliberate trade-offs about where money, time and energy go and that mindset is now reshaping households, workplaces and consumer behaviour across the country.”