The Australian dream of homeownership is fading, with banks now seeing first-time buyers well into their 40s! It's a harsh reality for many, including Maddy, a healthcare worker from Melbourne, who after saving diligently for seven years and attending 70 property inspections last year, has sadly put her home-buying aspirations on hold.
But here's where it gets tough: Maddy made three offers, only to see each home snatched up for over $100,000 above the asking price. Even with a substantial deposit, the rapid and significant price hikes meant she'd have to take on a mortgage at the absolute maximum she's allowed. This is a common thread, as statistics from the Australian Institute of Health and Welfare reveal a declining number of young people owning homes, with the average age of first-time buyers steadily climbing.
Maddy, at just 30 years old, found herself uncomfortable with the immense debt required. "To put myself in that level of debt, I'd have to borrow, I guess the maximum that I'm allowed," she explained. This led her to a difficult but pragmatic decision: to look overseas to start a family, a choice she admits feels "crazy, but it's just the reality."
And this is the part most people miss: The demographic of first-time homeowners is undeniably aging. Consider these figures: the percentage of homeowners aged 25-29 plummeted from 50% in 1971 to 36% in 2021. For those aged 30-34, the drop was from 64% to 50% over the same period. Westpac, the only major bank to share current data, revealed that the average age of a first home buyer is now 34, with a staggering one in five first home buyer loans last year issued to individuals over 40.
ANZ economist Madeline Dunk notes, "The profile of a first home buyer has changed quite a bit, even if you just think over the last five or so years." She adds that typically, these older buyers "have more money, they have a higher paying job and that's helping them get into the market."
Saving for a deposit is also a much longer haul. The Commonwealth Bank's PropTrack report indicates it now takes nearly six years on average for a household to save a 20% deposit on a median-priced home – almost double what it was 30 years ago. The average home loan across Australia stands at a hefty $694,000, more than doubling in the last decade, according to the Australian Bureau of Statistics. New South Wales leads the pack with an average loan of $828,000, while the Northern Territory is the lowest at $481,000.
While schemes like the expanded first home buyer guarantee can help people enter the market with a smaller loan, Ms. Dunk points out that they don't fully address the challenges of servicing and mortgage repayments, especially for those on lower incomes in an environment of rising interest rates.
Housing: A Political Hot Potato?
Independent economist Saul Eslake argues that housing has shifted from a basic need to a wealth accumulation tool, fundamentally altering our perception within the cost of living. He highlights a peculiar paradox: "Surprisingly, the biggest thing in the CPI (consumer price index — the main measure of inflation), which is the cost of housing, somehow, when that goes down, that's a bad thing, and the government ought to do something about it. And if it goes up, that's a cause for celebration, whereas everything else on the CPI, we treat the opposite way."
Mr. Eslake believes politicians aren't taking the housing crisis seriously. He points out that at the last election, both major parties proposed policies that would likely increase house prices. "That actually tells you why we have a problem," he states, "for all the crocodile tears that politicians of all stripes shed for the difficulties faced by aspiring first home buyers, they know that in any given year … there are only between about 110,000 and 150,000 of them."
Indeed, the expanded first home buyers guarantee scheme has been linked to price increases in cheaper housing segments. Data from Cotality shows homes under the price cap grew 3.6% in the December quarter, compared to 2.4% for homes above the cap. Mr. Eslake explains this by noting that politicians aim to win votes by appealing to the 11 million Australians who already own homes and the 2.5 million who own investment properties. "A million votes for cheaper housing, as opposed to maybe 12 million votes for more expensive housing, even the dumbest of our politicians can do their math."
Maddy worries about the long-term societal impact. "I don't even want to refer to housing as a dream … I think it's a minimum requirement that people should be able to afford their own home. If you take that away from people, you take their hope, you take their foundation … you take their ability to have a family and feel stable and safe within their community."
What About 2026?
Economists are anticipating a more subdued year for house price growth. December saw the smallest monthly increase in five months, at 0.7%. Notably, Sydney and Melbourne property markets actually declined by 0.1% in December, the first time since January last year.
Predictions about interest rates are also shifting. Madeline Dunk observes, "I think the rhetoric around what the RBA is going to do has shifted from the potential for more cuts to the potential for actually hikes in 2026 and that's flowed through into sentiment in the housing market." She expects investors to be less active this year compared to last due to these evolving expectations.
Saul Eslake's advice for young people facing this housing crisis has become almost a dark joke. "Without wanting to sound facetious you tend to just say, partner with someone who has rich parents, and I'm being sarcastic in saying that because I think it's a terrible state of affairs where that seems to be the most obvious solution."
He outlines three potential paths forward for Australia: First, a significant portion of current homeowners must become altruistically motivated to support policies that curb house price escalation for their children and grandchildren. Second, a sufficient number of homeowners must grow tired of acting as the "bank of mum and dad." Or third, and perhaps most telling, the same group of people must simply get fed up with their adult children (aged 25 and 35-plus) still living at home.
What are your thoughts on the current housing market? Do you agree with the economists' predictions for 2026, or do you foresee a different outcome? Share your opinions in the comments below!
