Australia’s ‘New Normal’ Housing Reality: First-Home Buyers Left Behind

Australia’s property landscape is fast becoming inhospitable to first-home buyers. Surging house prices, persistently high interest rates, and long-standing policy challenges are creating conditions that steadily reduce affordability.

First, the national housing market continues to climb. According to Cotality (formerly CoreLogic), national dwelling values increased by 0.6% in June and 1.4% over the first five months of 2025, reflecting steady growth in both capital cities and regional areas. The combined capital cities’ median house price now stands at approximately A$1,034,806. Nationally, the median house price is A$905,076, while median unit prices are A$686,399. Domain forecasts predict house prices will reach record highs in 2025–26, with Sydney potentially climbing to A$1.83 million and Melbourne to A$1.1 million by mid‑2026.

Interest rates also remain elevated. The Reserve Bank of Australia (RBA) held the cash rate at 3.85% in its 8 July 2025 meeting, surprising markets that had anticipated a cut. The decision, passed by a 6–3 vote, was described as a cautious pause while the RBA waits for clearer evidence that inflation is trending sustainably toward its target range. The cash rate, which guides borrowing costs, directly affects how much first-home buyers can afford to borrow.

These twin forces—soaring prices and unchanged rates—substantially narrow borrowing capacity for first-time buyers. Even modest rate cuts may not ease the pressure, as banks often delay passing reductions onto existing borrowers, prioritizing new customers instead.

The consequence: first-home buyers, even when comprising 70–75% of interested purchasers, are being regularly outbid, especially in tight markets like Perth, where homes now sell A$30,000–A$40,000 above asking prices. The median price in Perth has climbed to A$855,395, up 7.8% year-over-year.

Adding to the competition is an influx of eastern states investors into markets like Western Australia, particularly in the sub-$600,000 apartment segment—an area where many first‑home buyers historically found entry-level access.

In summary, Australia’s ‘new normal’ in housing—driven by record-setting prices and persistent interest rate pressure—continues to lock first-home buyers out. Without targeted reforms or meaningful measures to improve supply and moderate investor demand, home ownership remains a distant goal for many younger and modest-income Australians.