Buying your first home is often billed as a rite of passage. But given current market conditions in Australia, it’s more complex than ever. Before diving into debt and commitment, there are many things to think through. Here’s a breakdown of what the data shows, what you should consider, and when waiting or choosing alternatives might make more sense.
The Current State of Australia’s Housing Market
To determine whether it’s a good time to buy, we need to examine the current market conditions.
- Prices and Total Value of Housing
- As of the June quarter 2025, the mean dwelling price across Australia reached about A$1,016,700, up A$14,100 from the previous quarter. (Australian Bureau of Statistics)
- The total value of residential dwellings is roughly A$11.56 trillion, up from ~A$11.35 trillion in the previous quarter. (Australian Bureau of Statistics)
- Year-on-year growth varies by region — for example, Queensland and Western Australia saw +2.7% growth in dwelling values for the most recent quarter. (Australian Bureau of Statistics)
- Interest Rates & Monetary Policy
- The Reserve Bank of Australia (RBA) has cut interest rates this year; as of some recent data, the cash rate is ~3.60%. (Real Estate)
- These cuts are easing financing pressures somewhat, but rate expectations remain cautious. (Real Estate)
- Affordability, Deposit & Loan Size
- For owner-occupied homes, the average national loan size is around A$678,000 as of June 2025. New South Wales sits higher, around A$816,000. (Global Property Guide)
- The government has schemes to help first home buyers: e.g. the Home Guarantee Scheme allows eligible buyers to have a smaller deposit (as low as 5% in many cases), avoiding or reducing lenders’ mortgage insurance. (Housing Australia)
- Demand, Investor Pressure, Regional vs Metropolitan Differences
- Investor borrowing is high. Over the year to June, investor-originated new home loans reached a record (approx A$129 billion), while first-home buyer borrowing has not increased proportionally. (The Guardian)
- There is rising demand in more affordable regions and in some regional centres, driven by people seeking lower cost of living, lifestyle changes etc. (Daily Telegraph)
- Household Financial Stress
- Many households are under pressure: inflation has been high, and while recent interest rate cuts help, real disposable incomes for many have declined since 2022 when adjusted for inflation and interest. (Reserve Bank of Australia)
- Mortgage repayments have increased significantly for many mortgagors when the RBA raised rates in prior years. (Reserve Bank of Australia)
Key Factors to Consider Before Buying
Even if your circumstances seem favourable, there are many dimensions to check. Below are major ones, with relevant data where available.
| Factor | What to Ask Yourself / What to Measure | Why It Matters |
| Financial readiness | Do you have a stable income? What is your savings buffer? How big a deposit can you assemble (including stamp duties, legal fees)? | Low deposit = higher loan-to-valuation ratio → higher risk; fewer savings/low liquidity → less capacity to handle unexpected costs. |
| Interest rates & borrowing costs | What is the current mortgage rate (fixed vs variable)? How likely are future rate rises or further cuts? What are lenders’ repayment conditions? | Higher interest or rising rates can quickly blow out repayments. Fixed-rate gives predictability but may cost more. Variable rate may rise. |
| Market conditions | Are house prices still rising strongly in your target area? Are they expected to flatten or correct? What is the supply of dwellings? What is investor pressure? | If prices are inflated, risk of buying near peak. Low supply + high demand can push prices up; but supply catch-up or policy changes can cool market. |
| Personal circumstances | How stable is your job/income? Do you plan to live there for many years? Are there family/lifestyle obligations that affect whether you can move or need flexibility? | If you need to move in a few years, or if your income is unstable, owning has costs and inflexibility. |
| Location & future value | Is the area well serviced (transport, schools, amenities)? Is growth forecast? Are there risks (flood, bushfire, environment)? | Location heavily influences whether the property appreciates, or becomes a financial or maintenance burden. |
| Legal / regulatory aspects | What are stamp duty, property taxes, rates? Title issues? Zoning? Strata (if apartment)? Building conditions? Insurance costs? | Hidden legal or regulatory costs can be large. Poor building quality or strata levies may become burdensome. |
| Investment vs owner-occupier risk | Do you expect to treat the purchase as an investment (i.e. future capital gain)? Or purely owner-occupier? Is there rental demand if you need to rent out? | Investment risk includes market corrections, vacancy, maintenance, tax issues. Owner-occupiers still face risk from debt burden. |
| Debt burden / ability to service debt | What proportion of your income will go to mortgage + other debts + ongoing home costs (repairs, insurance, rates)? What buffers do you have? | Over-leveraging can lead to stress or default in adverse events (job loss, rate rises, unexpected maintenance). |
| Emotional readiness | Are you prepared for the responsibility of ownership (maintenance, repairs, bills)? Are you comfortable being less mobile? Is owning a “dream home” emotionally driven or financially sensible? | Buying for emotion can lead to overpaying. Resentment or regret if the home becomes more burden than asset. |
| Alternatives | Renting vs buying: how do costs compare now? Could waiting let you save more deposit? Could alternative property types or locations suffice? | Sometimes renting longer, investing savings elsewhere, or buying slightly later in a cheaper area yields a better outcome. |
Why Someone Might Reconsider Now
Putting together current conditions with the factors above, here are specific reasons why you might pause or rethink buying a first home at this time.
- High Price Base + Affordability Pressures
The average home price is above A$1 million in many markets; with incomes not rising at the same rate, the ratio of home price to household income is high. That means larger mortgages and smaller safety margins. Buying now risks being over-exposed if prices stagnate or fall. (See for example price increases outpacing income growth, and the cost of getting into a home rising.) (The Guardian) - Debt Risks Are Larger
First home buyers often take on high loan-to-valuation ratio (LVR) mortgages (i.e. smaller deposit). These leave little room for error: small market corrections, unexpected expenses, or interest rate rises can quickly lead to negative equity or financial stress. The RBA has studied that FHB loans are riskier in early years due to lower liquidity buffers. (Reserve Bank of Australia) - Interest Rate Uncertainty
Although there have been rate cuts, further cuts may be cautious; conversely, variables like inflation, global economic pressures, or domestic shocks could reverse course. If rates rise, repayments increase. Some borrowers are already facing repayments that are 30-60% higher than before interest rate rises started. (Reserve Bank of Australia) - Competitive Pressure
Investor borrowing is strong. More investors are targeting lower-priced suburbs or affordable regions, which makes it harder for first home buyers to find suitable properties. This increases competition and may force FHBs to pay more or compromise. (The Guardian) - Hidden Costs and Ongoing Expenses
Owning a home doesn’t just mean mortgage repayments. Maintenance, insurance, rates, strata (if apartment), repairs, appliance replacement—all add up. Also, there are one-off costs at purchase (legal fees, stamp duty etc.). If you underestimate these, the home can become financial strain. - Personal Instability or Short Horizon
If you expect to move in a few years (for work, lifestyle, family), owning may not make sense: transaction costs (buying/selling), stamp duty (or land tax etc.), capital gains/taxes, moving costs, etc., eat into gains. Also, if your income or job security is unclear, committing to large debt is riskier. - Opportunity Cost
Money you lock into the house makes it unavailable to invest elsewhere (e.g. shares, super, starting business, travel). Sometimes these alternatives provide better returns or flexibility. Also saving more for a larger deposit might reduce the cost of borrowing significantly. - Emotional / Psychological Costs
Owning involves responsibility. Unexpected repairs, fluctuations in costs (heating, cooling), maybe restrictive in terms of relocating, feeling “locked in”. These are real costs beyond finances.
When It Might Still Be a Good Decision
It’s not all “do not buy.” There are situations where buying now makes sense.
- If you can comfortably afford a deposit (say 20% or more) and still maintain reserve savings.
- If your job/income is stable and rising, or you have multiple income streams.
- If your aim is long-term ownership (10+ years), meaning you can ride out cycles.
- If you find a property in a location with good growth prospects, low risk of depreciation, good amenities, infrastructure etc.
- If you can lock in favourable interest rates, or fixed terms that limit exposure.
- If renting costs in your area are high and likely to continue rising, owning may protect you from escalating rents (though this has to be weighed against all ownership costs).
Practical Checklist Before Deciding on Your First Home
Here’s a checklist you can use to test your readiness or whether you should wait.
| Checklist Item | Action / Metric |
| Deposit & upfront costs | Calculate deposit + stamp duty + legal + inspection fees; aim for buffer funds > 3-6 months of repayments. |
| Repayment ability | Use calculators to estimate repayments under different rate scenarios (e.g. +1%, +2% interest, or even worse). Can you still afford with emergencies? |
| Budget for all ongoing costs | Rates, insurance, maintenance, possible strata fees, utilities. Include unexpected costs (e.g. major repairs). |
| Compare renting vs buying | Total cost over similar period, including costs of buying & selling, ongoing costs; opportunity cost of deposit. |
| Check property condition & location risks | Inspections, flood map, building quality, growth of infrastructure, local economy. |
| Legal and regulatory checks | Zoning, heritage restrictions, strata rules, state grants available etc. |
| Have an exit plan | What if you need to sell early? What are the costs? Are you ok with potentially losing value or seeing slow growth? |
Possible Risks If Buying Without Adequate Preparation
- Debt stress: missing repayments, being in mortgage arrears, higher risk of default or forced sale under adverse circumstances.
- Negative equity: if property value falls or you overpay, you could owe more than the house is worth.
- Liquidity risk: houses are not easy to sell quickly (especially in some areas), so if you need cash (for job loss, medical bills, etc.), it’s harder than with financial assets.
- Opportunity cost: funds locked in home purchase could have been used in other investments, possibly earning better returns.
- Maintenance surprises: older homes or those not properly inspected can bring unexpected large bills (roof, structural, pest etc.).
- Moving / flexibility limitations: owning ties you to a location; relocating becomes more complex.
Conclusion: To Buy or Wait?
Given the current data:
- The cost of entry (deposit, price, ongoing costs) is high.
- Interest rates are lower than recent peaks, but not low enough to eliminate risk; variability remains.
- Market pressure from investors and limited supply are pushing competition, particularly in affordable segments.
- Financial stress among households is real; small shocks can become large burdens for those overcommitted.
If I were advising a first home-buyer today, I would lean toward caution. Only proceed if you are very well prepared: solid savings, stable income, realistic about all costs, and confident in the location you buy into. If any of those are weak, waiting (while saving more, perhaps seeking cheaper area or different property type) or renting longer may be the smarter path.
References
- ABS. “Total Value of Dwellings, June Quarter 2025.” Australian Bureau of Statistics. (Mean dwelling price, total value of residential dwellings data)
- ABS / RealEstate.com.au. “Australian Property Market Update – dwelling price growth in QS, capital cities etc.”
- Reserve Bank of Australia. Reports on cash rate, interest rate cuts, and monetary policy statements (economists’ commentary).
- Global Property Guide. “Australia’s Residential Property Market Analysis 2025” – average national loan size data.
- The Guardian. “Australian property investors squeezing out first-time buyers …” – investor borrowing vs first-home buyer activity.
- RBA (Financial Stability Review). “Resilience of Australian Households and Businesses” – data on household income, inflation, rates, repayment stress.
- Housing Australia / Government sources. Home Guarantee Scheme eligibility, deposit requirements, etc.
- CoreLogic / News outlets. Data on median home value increases over five years, affordability ratios.
