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Surging House Prices Challenge Australian First-Time Buyers

Surging House Prices Challenge Australian First-Time Buyers

Surging House Prices Challenge Australian First-Time Buyers?w=400
As property prices continue to soar across Australia, first-time homebuyers are facing an increasingly challenging market.
High-end properties exhibit greater volatility, responding sharply to interest rate changes, as illustrated by CBA data comparing the price fluctuations of the most costly and least expensive homes.
Recent interest rate cuts by the Reserve Bank of Australia (RBA) have fueled a rise in property prices, yet costlier homes have not seen as much growth as more affordable ones.

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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