First-home buyers face impossible choice as property prices soar

ANALYSIS

The Australian dream of owning a home is slipping further out of reach as confronting new figures reveal just how much income property buyers now need — even if using government support.

Analysis of median price figures and interest rates has found buyers are facing an impossible dilemma in Australia’s largest cities.

They either have to save massive six-figure sums for a traditional 20 per cent deposit, or earn an extraordinary income to be able to afford the repayments on a 95 per cent loan.

A loan at 95 per cent of the value of a home purchase is currently being supported by the government’s First Home Guarantee Scheme.

The guarantee allows eligible first-home buyers to use smaller deposits without incurring pricey lender’s mortgage insurance. Expansion of the scheme was a pledge during the Labor Party’s campaign for re-election earlier this year.

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But there is a catch: being able to afford the higher debt at 95 per cent is no small feat at current prices.

And the costlier repayments could mean apartment owners paying nearly $9,000 more per year for a typical capital city unit in some cases, according to the analysis of PropTrack median price data. This is compared to buying with a traditional deposit.

BRISBANE

Those purchasing a Brisbane house at the current $1.12m median would not be able to use the First Home Guarantee scheme as it would surpass the Queensland scheme price cap of $1m.

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Going the more traditional route of saving a 20 per cent deposit would require savings of about $225,000, plus more for the stamp duty, analysis of PropTrack data showed.

Brisbane’s median unit price is currently $770,000, which would be eligible for the First Home Guarantee Scheme.

But servicing a mortgage at 95 per cent of the value of this purchase would require about $4,150 a month. Such a loan would cost nearly $7,900 more per year than a mortgage on the same purchase price with a 20 per cent deposit.

And that 95 per cent loan would require an income of at least $142,000 a year to be considered affordable – well above the circa $110,000 a year average household income in Queensland.

This assumed the buyer had an average loan rate of 5.5 per cent and their repayments did not exceed 35 per cent of their income, a point at which getting approval for the loan would become challenging.

SYDNEY

Sydney’s situation is more complex. The city’s median house price of $1.62m is above the $1.5m price cap for government’s guarantee scheme.

A 20 per cent deposit on a median-priced Sydney house would be $324,000 — more than the price of an entire home in some regional areas.

For a unit, the story isn’t much better.

At the median unit price of $874,000, buyers need $175,000 upfront for a 20 per cent deposit.

Using the First Home Guarantee would reduce the upfront burden but it would radically change the repayments.

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A 95 per cent loan at Sydney’s median unit price would mean a monthly mortgage bill of about $4,700.

That’s about $8,950 more expensive per year than the repayments would be with a 20 per cent deposit – assuming interest rates did not rise.

Affording the higher repayments on that 95 per cent loan would require a household income of at least $161,000 a year – a big ask for a first-home buyer.

MELBOURNE

It’s a slightly gentler squeeze in Melbourne.

Melbourne’s median house price is currently $1.01m, which is above the $950,000 price cap for the First Home Guarantee Scheme.

A 20 per cent deposit on a median-priced house is about $201,000, while a median priced unit ($625,000) would require $125,000 for a traditional deposit.

Those using the government scheme to buy a median priced unit still face punishing income thresholds: $116,000 a year to service a 95 per cent loan on the purchase.

Those using scheme at the median unit price would be paying about $6,400 a year more in repayments.

ADELAIDE

Accessing the First Home Guarantee to buy a median priced Adelaide unit ($655,000) would mean $6,700 a year in extra repayments.

Those who managed to put together a 20 per cent deposit on the purchase, $131,000, would pay about $2,975 a month in repayments, while those buying with a 95 per cent loan would pay $3,530.

Being able to afford the higher repayments on that 95 per cent loan would require a gross annual income of at least $120,000.

HOW BUYERS ARE RESPONDING

Sarah Megginson, personal finance expert at Finder, said Aussies were going above and beyond to boost their chance of mortgage approval.

“Lenders are scrutinising household spending more than ever, which means everyday purchases – from dining out to digital subscriptions – can be the difference between a loan approval and a rejection.

“Consumers aren’t just cutting back on luxuries; many are reworking their entire financial lives to prove to lenders they’re a safe bet.

“The fact that so many are cutting back just to refinance reveals how tight the credit environment is. It’s no longer enough to have equity, you need spotless spending habits too.”

Finder’s data shows more than one in three (35 per cent) Australians don’t think they’ll ever be able to afford their own home.

Ms Megginson said some are putting major life plans on hold, from starting a family to upgrading a car, in a bid to keep or qualify for a mortgage.

“It’s a stark reminder that home ownership now dictates how, and when, Australians live their lives,” she said.

CREDIT LEVELS RISING

Simply getting by each month is getting more challenging for Aussie households.

Australians continue to grow their money debt in credit cards, according to Compare the Market’s 2025 Household Budget Barometer report.

Half of Australians surveyed (50 per cent) said they had credit card debt in 2025 – a 9 per cent increase compared to last year.

Compare the Market’s economic director David Koch said these findings indicated that Australians were combating high cost-of-living by increasing their personal debt.

“When the bills and everyday life expenses continue to pile up, Australians are unfortunately resorting to credit cards, Buy Now, Pay Later, and personal loans in order to fulfil their lifestyles,” Mr Koch said.

“Whether it’s shopping for Christmas presents or trying to pay high medical bills, money is tight for many. People can’t afford to wait and save up; they need the money now.”

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