First-home buyers face worsening affordability despite previous rate cuts

First-home buyer affordability deteriorated over the past year even after last year’s interest rate cuts, according to new research from Domain.

The property listing platform’s report revealed that over the five years to 2025, national entry-level house prices rose by 68%, while entry-level units increased by 30%.

 Source: Domain 

Over the same period, wages lifted by only 21% and did not keep up with inflation, which rose 23%. This divergence has eroded purchasing power at the lower end of the market and increased the reliance on larger deposits, higher debt levels or external financial support.

Domain’s analysis also highlights the growing challenge of saving a 20% deposit. Every capital city recorded an increase in the time required to reach this threshold for an entry-priced home.

Darwin remains the most accessible capital on this measure, yet even there, the time needed to save a 20% deposit for an entry-level unit has increased to two years and seven months, five months longer than a year earlier.

At the other end of the spectrum, an entry-level house in Sydney now requires a deposit-saving period of seven years and seven months, 10 months more than the previous year. Brisbane has moved into second place for least accessibility, followed by Adelaide and Perth.

Across the combined capitals, repayments on an entry-priced house now absorb an average of 48.9% of household income, an increase of almost 24 percentage points in five years. For units, the average repayment share has climbed to 30.9%. These figures imply a growing incidence of borrowers approaching or exceeding traditional mortgage stress thresholds at the point of purchase.

 Source: Domain 

The research also finds that the traditional role of units as a more affordable entry point into ownership is under pressure. In several faster-growing capitals, the advantage of buying a unit over a house – measured in both saving time and repayment burden – has narrowed.

For the first time on record, Brisbane now requires the longest period to save a deposit for an entry-level unit, overtaking Sydney. In Adelaide and Perth, the gap between the time needed to save for an entry-level unit and an entry-level house has shrunk to 18 months or less, reducing the relative appeal of units as a stepping stone into the market.

“First-home buyers are being locked out of more markets than ever before, and those who do manage to buy are taking on greater financial risk than at any time in the past decade,” said Nicola Powell (pictured right), chief of research and economics at Domain.

“Interest rate cuts in 2025 offered some relief, but they weren’t enough to undo years of strong price growth and rising household debt. In many markets, affordability actually worsened even as rates fell.

“What’s most concerning is that this is no longer just a Sydney problem. Brisbane, Adelaide and Perth, once seen as more attainable, have seen rapid growth in entry-level prices, pushing them much closer to the least affordable markets.

“Units have traditionally been the stepping stone into home ownership, but even that pathway is narrowing. In several capitals, unit buyers are now stretching themselves into mortgage stress.”

The report notes that targeted schemes such as the 5% Deposit Scheme and Help to Buy have shortened saving times for some borrowers and, in limited cases, improved serviceability. However, Domain’s analysis concludes that these initiatives have not resolved the broader affordability problem, particularly in higher-priced markets where repayment ratios remain elevated.

“This shows the affordability challenge has become a deeper, structural problem,” Powell stressed. “Getting into the market now depends more on where you live, how much you earn and whether you have family support than simply how well you save.

“Without sustained action to increase supply and tackle upfront and ongoing costs, there’s a real risk home ownership could slip permanently out of reach for many young Australians.”