Owning a home has long been the cornerstone of the Australian dream. But for younger generations, that dream is slipping further out of reach, according to the latest Domain insights.
The path to homeownership is now defined by record deposit hurdles, high mortgage repayments, and the sharpest generational divide in housing access in modern history.
At its core, housing affordability reflects the relationship between household income and housing costs. For aspiring buyers, it is measured in two key ways:
mortgage serviceability – the share of income required to meet loan repayments
deposit gap – the time to save the upfront costs of a purchase, typically a 20% deposit plus transaction costs such as stamp duty
These headline measures mask the reality that affordability pressures fall unevenly. First-home buyers, younger Australians and lower-income households face far greater barriers than the median suggests.
Still, buyer sentiment is showing signs of improvement. Resolve Finance’s latest Generation Rent Report found that 57% of renters plan to buy their first home or investment property in the next two years, up from 42% a year ago.
“Many Australians, particularly younger buyers, are no longer waiting on the sidelines,” Resolve Finance managing director Don Crellin said. “Instead, they are finding new ways to enter the market, from purchasing with family or buying an investment property first, to using government assistance.”
However, while sentiment is improving, affordability remains stretched. The PropTrack CommBank First-Home Buyer Report 2025 noted that despite recent rate cuts, many first-home buyers continue to face significant deposit and serviceability hurdles.
The report highlighted that the Reserve Bank has delivered three rate cuts in 2025, most recently lowering the cash rate to 3.6%. These moves are expected to improve borrowing capacity and affordability.
But as REA Group senior economist Angus Moore noted: “Saving for a deposit is the key hurdle for first-home buyers, creating a substantial savings burden. On top of this, record low housing affordability and tough mortgage serviceability have been significant challenges.”
According to Domain, the biggest hurdle for first-home buyers is the deposit gap. The median-income household now needs more than eight years to save a 20% deposit, up from six years in the early 2000s.
Once past that hurdle, mortgage repayments are far higher than in previous decades. A typical new loan now consumes around 54% of household disposable income – the highest level in at least 20 years.
Mortgage serviceability was steady from the early 2000s to 2022 but deteriorated as property prices surged and interest rates rose. While lower rates in 2025 have provided some relief, rising home prices continue to offset affordability gains.
The effects are clear: younger Australians are far less likely to own a home than earlier generations. Homeownership rates for under-34s have dropped in every state, led by steep declines in New South Wales and Victoria. Western Australia has seen smaller falls, but the generational divide remains stark.
Those born in 1987-91 are significantly less likely to own a home than those born in 1947-51.
Several structural factors are holding back homeownership:
Long periods of low interest rates have boosted property values and deposit requirements
Income volatility and insecure work make long-term borrowing riskier
Later marriage and smaller families may have shifted preferences towards renting
Rising property taxes, particularly stamp duty, have added to upfront costs
Stamp duty brackets were largely unchanged until 2019, pushing more buyers into higher tax tiers as property prices rose. This has further increased the time it takes aspiring buyers to save for a home.
Reserve Bank research estimates that falling interest rates account for around 90% of the decline in homeownership rates across households, with the benefits of cheaper credit mainly accruing to those who already owned property.
Australia is not alone. Declining homeownership among young people is also evident in the UK, US, and Europe. International studies have pointed to greater income risk, delayed marriage and shifting preferences as key factors behind the trend.
Affordability pressures are reshaping demand. Since 2022, lower-priced homes have outperformed premium properties in most cities, particularly in Perth, Brisbane, and Adelaide.
Search trends reflect this shift. Terms such as “dual”, “granny” and “duplex” are now in the top ten most searched housing terms – none of which featured a few years ago. This reflects rising interest in affordable and higher-density housing.
Australia’s housing affordability challenge is defined by structural barriers to entry. Deposit requirements, stamp duty, lending standards and higher rates are delaying or blocking ownership for many.
Potential reforms include:
Replacing stamp duty with a broad-based land tax
Expanding shared-equity and low-deposit schemes
Reviewing lending standards to balance stability and access to credit
Broader tax reforms also warrant consideration, including the structure of income taxes, negative gearing and capital gains tax discounts, and the treatment of owner-occupied housing in the pension assets test.
With homeownership rates falling and entry barriers rising – particularly for younger Australians – there is growing pressure to tackle these structural drivers. Coordinated action across government, industry and the community will be needed to restore affordability and access, Domain reported.
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