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Australia’s first-home buyers are being pushed to the margins of the property market just as conditions are lining up for investors to re-enter in force, leaving mortgage brokers to manage an increasingly fraught path into ownership for younger clients, as reported in The Age.
While prices have surged and borrowing costs remain high, new analysis from KPMG shows how sharply the ground has shifted under aspiring buyers, particularly those on otherwise solid household incomes. The data underlines how few properties remain within reach even for relatively well-paid couples – and highlights the challenge brokers face in finding workable deals without stretching clients too far.
According to KPMG, a household earning $180,000 a year can now afford just 12 per cent of the nation’s housing stock, down from around 30 per cent five years ago when a typical comparable income was $150,000. This deterioration has occurred despite the increase in income, underscoring how quickly prices and interest costs have outpaced wages. Notably, the firm points out that the average income for two full-time workers is about $145,000, meaning many couples sit below the benchmark used in the study.
For brokers, that translates into a narrowing band of acceptable properties and a rising risk that pre-approvals no longer match what clients can realistically buy once they start bidding. It also means buyers on modest incomes are being pushed into riskier strategies – such as higher loan-to-value ratios, more aggressive use of parental guarantees or stretching loan terms – just to stay in contention.
The affordability crunch is not evenly spread. KPMG’s work shows first-home buyers in Queensland face the steepest fall in options. Five years ago, a household on $150,000 could access about 60 per cent of the state’s housing stock. That share has now plunged to just 15 per cent.
In South Australia, where prices have risen rapidly over the past five years, median home values are up by around 80 per cent. That surge has effectively removed half of the affordable stock for a typical first-home buyer couple. Buyers in 2019–20 earning $150,000 could choose from three-quarters of local properties; that share has shrunk dramatically, even though South Australia still offers the largest relative pool of “affordable” homes compared with other states.
New South Wales remains the most daunting market, with a long-standing reputation for competitive auctions and limited supply. KPMG’s analysis suggests affordability there has not improved since 2019–20, leaving first-home buyers in Australia’s largest state battling on largely unchanged – but already stretched – terms.
For brokers working across multiple jurisdictions, the divergence between states makes product selection and client guidance more complex. A borrower pre-approved on the same income and deposit can have vastly different buying power in Brisbane compared with Adelaide or regional centres, pushing advisers to sharpen their messaging around expectations and location trade-offs.
The demand-side pressures have been amplified by a severe shortage of new housing. A separate KPMG study last year found construction of new homes had fallen to an almost 40‑year low. For first-home buyers, that means fewer fresh townhouses and entry-level apartments coming onto the market – precisely the stock that traditionally helps younger households move from renting to owning.
Compounding the problem, an economist cited in the analysis notes that the type of housing being produced has shifted. “Since 2022, a wave of builder insolvencies has pushed developers to pivot toward premium, high-end projects.” Rather than focusing on mid-market or affordable dwellings, developers have increasingly targeted wealthier buyers who can absorb higher build and finance costs.
For mortgage brokers, this tilt towards higher-end stock matters as much as the overall supply shortfall. Even when clients are prepared to compromise on size, location or dwelling type, there are simply fewer suitable properties in the pipeline at the entry level. That limits the scope for strategies such as off-the-plan purchases or “rent-vesting” into more affordable new-build projects.
While KPMG’s work centres on first-home buyers, the same conditions that have squeezed them out are starting to draw investors back in. Rental vacancies remain tight in many capitals, yields have improved with higher rents, and expectations that interest rates are near or at their peak are already feeding through to investor sentiment.
As borrowing conditions stabilise, cashed-up investors with equity in existing properties are well placed to outbid first-home buyers, especially at auctions for well-located units and townhouses. For brokers, that suggests a looming period where pre-approved owner-occupiers find themselves repeatedly beaten by seasoned investors who can move quickly, waive conditions or stretch further on price without breaching their serviceability comfort zone.
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