Property ladder moving further out of reach for first home buyers
New analysis from one of the big banks suggests supply shortages and fierce competition are making the journey into home ownership longer and more difficult for many Australians.
First home buyers are being squeezed out of Australia’s housing market as supply shortages intensify, raising fresh questions about whether current policies are helping or hindering aspiring homeowners.
New research from Westpac’s latest Home Ownership Report paints a challenging picture for those attempting to enter the market, with limited housing stock and fierce competition emerging as the biggest barriers to ownership.
Nearly one in four potential first home buyers say a lack of properties listed for sale is preventing them from entering the market, while another 26 per cent report difficulty finding homes that meet their needs because not enough new dwellings are being built.
Competition is also intensifying. Almost two in five buyers say rival bidders are a key obstacle to purchasing their first property, highlighting the demand pressures created by Australia’s chronic housing shortage.
Carolyn McCann, Westpac’s Chief Executive of Consumer Banking, on Tuesday (10 March) said supply shortages were now the central issue in the affordability debate.
“Young Australians are eager to get into the property market, but the reality is limited supply is creating significant challenges,” she said.
“The most critical focus has to be on supply.
“We need to build more homes at the right price point so that every Australian feels they have a chance to own their own home.”
A housing shortage years in the making
The findings reinforce warnings from economists that Australia’s housing crisis has been decades in the making and will take years to resolve.
The national housing target of building 1.2 million homes by 2029 is already under pressure, with industry observers suggesting the country may struggle to even reach one million completions over that period.
That gap between supply and demand is a key reason why property prices continue to rise even as affordability deteriorates.
The national median dwelling value has recently pushed beyond the $1 million mark, placing home ownership further out of reach for many first-time buyers.
The financial hurdles are also growing steeper. Research suggests it now takes close to six years on average for a household to save a 20 per cent deposit for a median-priced home, almost double the timeframe required three decades ago.
Not surprisingly, the profile of the first home buyer is changing. The average age of a buyer is now about 34, with a growing share entering the market in their 40s after spending longer saving for a deposit.
Are government incentives helping?
Government schemes aimed at helping first home buyers are playing an increasingly visible role in the market.
More than half of aspiring buyers say they support additional government assistance to improve housing affordability, reflecting growing reliance on initiatives such as the federal government’s Home Guarantee Scheme and Help to Buy programs.
These programs allow eligible buyers to purchase with smaller deposits and reduce or remove lenders mortgage insurance.
Some critics argue such incentives can unintentionally push prices higher by increasing demand in a market where supply remains constrained.
Industry groups, including major real estate networks and mortgage broker associations, have warned that grants and deposit schemes risk inflating property values and increasing debt levels for younger buyers if housing supply does not keep pace.
Their argument is that boosting purchasing power without increasing housing stock may simply allow buyers to bid more for the same limited number of homes.
But not everyone thinks the high levels of capital growth seen around the country is attributable to these incentives at the more affordable end of the market.
Helen Avis, Director of Finance, Specialist Mortgage, said restrictions on access to the deposit scheme meant the impact of property prices was limited.
“Previously, there was an income limit on accessing the deposit scheme of $125,000 for singles and $200,000 for couples but now there are no limits, so in Sydney can buy anything worth up to $1.5 million and get a 95 per cent loan
“There is, however, a restriction on assets the buyer can have.
“You are only allowed to have $25,000 left in cash or shares etcetera after you have paid your deposit and the costs to settle.
“Any more than this and the bank approved the loan for the lesser amount, using that cash, so the scheme cannot be taken advantage of.
“Most first home buyers struggle to meet servicing to buy a home they want to live in, so they either have to stay at home, rent or get a hand out from their parents, so they are not even using the scheme.
“So, personally, I do not think they are having a big impact on driving the market upwards,” Ms Avis said.
Buyers becoming more flexible
Despite these challenges, demand from younger buyers remains strong.
Westpac’s research shows many first home buyers are adapting their expectations in response to affordability pressures. A growing proportion are considering apartments or townhouses rather than detached houses, while others are widening their search to different suburbs or regions.
Alternative housing models are also gaining traction. More than a third of first home buyers believe options such as build-to-rent or rent-to-buy developments could help improve affordability and access to housing.
At the same time, buyers are increasingly open to higher-density housing in established suburbs if it improves affordability, although concerns remain about the potential impact on neighbourhood character and infrastructure.
Renters feeling the pressure
For many Australians, the urgency to buy is being driven by conditions in the rental market.
Renters with arguably the greatest motivation to get onto the property ladder are living on the Gold Coast, where rental costs have surged to become the highest in the country.
Rapid rent price growth in the region has intensified pressure on tenants, reinforcing the financial case for ownership even as entry costs rise.
The situation highlights a broader national trend: as rents climb and vacancy rates remain tight in many cities, renters face increasing difficulty saving for deposits while also covering rising living costs.
A long-term affordability challenge
Ultimately, the Westpac report reinforces a growing consensus among economists and policymakers that Australia’s housing affordability crisis cannot be solved quickly.
Decades of underbuilding, population growth and planning constraints have created a structural supply deficit that will take years to unwind.
While government assistance programs may help some buyers enter the market sooner, many analysts argue that significantly increasing housing supply is the only sustainable solution.
That means accelerating development approvals, expanding construction capacity and encouraging a wider mix of housing types.
Until those structural changes occur, aspiring homeowners are likely to face continued competition, rising prices and longer paths to ownership.
