The Uphill Battle: First Home Buyers in Australia’s 2025 Property Market

For Australians dreaming of home ownership, 2025 is proving to be one of the most challenging years on record.

Residz Team 5/23/2025 4:32:53 PM 4 min read

For Australians dreaming of home ownership, 2025 is proving to be one of the most challenging years on record. Despite talk of imminent interest rate reductions, the relentless rise in property prices and the cost-of-living squeeze mean that first home buyers face a daunting path to getting a foot on the property ladder. However, a range of federal and state government initiatives are providing some relief-though not enough to solve the affordability crisis entirely.

The State of the Market in 2025

Australian housing affordability has reached historic lows. At the end of 2024, the national dwelling value-to-income ratio hit a record high of 8.0, far above the 20-year average of 6.7. Servicing a mortgage on a median-priced home now consumes over half (50.5%) of the median household income, while saving for a deposit takes an average of 10.6 years. The root causes are clear: a chronic undersupply of housing, robust population growth, and persistent demand.

Although property price growth is expected to slow in 2025 compared to previous years, prices are still forecast to rise between 3% and 6% nationally, with units (apartments and townhouses) set to outpace detached houses due to their relative affordability. In some cities, such as Melbourne and Hobart, prices have softened, creating a narrow window of opportunity for first home buyers-but this is unlikely to last as interest rates begin to fall and competition heats up again.

Interest Rates: Relief on the Horizon?

The Reserve Bank of Australia (RBA) has begun cutting rates, with the cash rate dropping to 4.10% in March 2025-the first reduction since 2020. Major banks predict further cuts, potentially bringing the cash rate down to around 3.1% by mid-2026. Lower rates could boost borrowing power, but they also risk reigniting price growth as more buyers re-enter the market. For first home buyers, this means acting quickly before renewed demand pushes prices higher.

Government Initiatives: What Help Is Available?

While the challenges are formidable, several federal and state schemes aim to ease the burden for first home buyers. Here’s a breakdown of the key programs and how they work:

Federal Government Schemes

First Home Guarantee (FHBG):
Allows eligible buyers to purchase a home with as little as a 5% deposit, without paying Lenders Mortgage Insurance (LMI). The government acts as a guarantor for the remainder, helping buyers enter the market sooner.
The scheme is capped, so not all applicants will be successful each year.
Help to Buy (Shared Equity Scheme):
The government provides an equity contribution of up to 40% (for new homes) or 30% (for established homes), reducing both the deposit and the size of the mortgage required.
Recent budget changes have increased the income and property price caps, making the scheme more accessible and expected to help around 40,000 households over four years.
Buyers retain the option to purchase the government’s share over time.

State-Based Grants and Concessions

Each state and territory offers its own mix of grants and concessions. Here are some examples:

First Home Owner Grant (FHOG):
Typically $10,000–$30,000 for new homes (not established properties), with maximum property value caps (often $750,000).
For example, in Queensland, the grant is $30,000 for contracts signed before 30 June 2025, dropping to $15,000 thereafter, and only for new homes under $750,000.
In Victoria, a $10,000 grant is available for new builds up to $750,000.
Stamp Duty Concessions:
In Victoria, first home buyers pay no stamp duty on homes up to $600,000, with a sliding scale for properties up to $750,000, saving up to $31,070.
Other states offer similar concessions, though the rules and thresholds vary widely.
Home Buyer Concession Scheme (ACT):
Instead of a grant, the ACT offers a maximum concession of $34,270 on eligible properties, including both new and established homes, subject to income thresholds.

Do These Schemes Make a Difference?

Government incentives can shave years off the time needed to save a deposit and reduce the upfront costs of buying a home. For example, the First Home Guarantee and Help to Buy schemes allow buyers to enter the market with a much smaller deposit, bypassing the need for expensive LMI. Stamp duty concessions and grants can further reduce the financial burden.

However, these measures only partially offset the broader affordability crisis. The sheer scale of price growth means that even with assistance, many first home buyers still struggle to save enough, especially in high-demand cities where median prices exceed $800,000. Moreover, most grants are limited to new builds, excluding buyers seeking established homes, and many schemes are capped or subject to strict eligibility criteria.

Prospects for First Home Buyers in 2025

The next six months may represent a rare window of opportunity. With prices stabilising in some markets and interest rates beginning to fall, first home buyers who are well-prepared and able to move quickly could secure a property before competition intensifies again. Units and apartments, in particular, are emerging as a more realistic entry point due to their lower price growth and relative affordability.

Yet, the fundamental challenges remain. Affordability is at record lows, and any improvement in borrowing conditions is likely to be offset by renewed price growth as more buyers return to the market. Government schemes provide valuable support but are not a panacea.

Conclusion

Buying a first home in Australia in 2025 is harder than ever, but not impossible. Success will depend on careful planning, a thorough understanding of available incentives, and the ability to act decisively in a fast-moving and competitive environment. For those able to navigate these challenges, the dream of home ownership is still within reach-but the window may be closing fast.