First home buyers in Australia left with increasingly limited options

According to the KPMG analysis, first home buyers with an average annual household income of $180,000 can now only afford 12 percent of the nation’s housing stock, down from around 30 percent five years ago on an average $150,000 income.

Notably, the average household income for two full time workers in Australia is currently $145,000. The picture is even more grim for aspiring home-owners in New South Wales, who can afford just 5 percent of the state’s available properties based on the same metric.

“In just five years, the face of the market has changed dramatically,” said KPMG urban economist Terry Rawnsley. “Median prices continue to soar, but average first home buyers aren’t targeting median-priced homes. Instead, they’re seeking more affordable options, focusing on regional markets or competing for a shrinking pool of apartments and greenfield homes in major cities.”

Based on broad averages and other calculations, the typical first home has risen in price from $560,000 to $760,000 over the past five years, with market accessibility shrinking according to relative household incomes and home-loan costs. Meanwhile, a KPMG study from last year found the construction of new homes in Australia had slumped to an almost 40-year low.

While residents of New South Wales are familiar with the daunting and highly-competitive landscape, their access to affordable options unchanged since 2019-20, home buyers entering the market in Queensland for the first time face the biggest shock, their options dwindling to just 15 percent compared to just five years ago when access rates were at 60 percent.

To add further pain, KPMG’s housing report follows a week on from a population study in which it declared Southeast Queensland as Australia’s fastest-growing region, with numbers set to reach 4.5 million by the 2032 Olympics and potentially cross the 5 million mark just four years later. Compounding the issue, population growth in the under 35 bracket has doubled since 2020.

But the picture isn’t much prettier elsewhere. In South Australia, where median home prices are up by around 80 percent from five years ago, half of the affordable options have been effectively taken off the table. While still the state with the largest pool, buyers in 2019/20 with a $150,000 income could pick from 75 percent of the local stock. That figure has now dropped to just 25 percent.

Meanwhile, Victorians, already long squeezed, now get to choose from one in ten properties, down from 15 percent, and they’re unlikely to be found in the trendier parts of town. Noting the flow-on effects such as to job commutes and raising a family, Rawnsley says, “There will be all sorts of compromises, whether it’s a growth area further away from work, or a much smaller apartment.”

According to the economist, the types of housing needs to be considered alongside policy efforts to increase its supply; “Since 2022, a wave of builder insolvencies has pushed developers to pivot toward premium, high-end projects. These dwellings may be fewer in number, but they’re easier to sell and carry lower financial risk, marking a clear shift away from affordable supply.”