Australia’s first-home buyers are being priced out at an unprecedented rate, with new analysis showing they can now afford just 12 per cent of homes nationally, down from nearly one-third only five years ago. According to the Australian Financial Review, KPMG’s latest affordability study reveals that home prices have far outpaced wage growth, dramatically shrinking the share of suburbs within reach of new buyers.
KPMG assessed affordability across five states, benchmarking suburbs with a median home value at or below $760,000, the average price first-home buyers are accessing in FY25. This was compared to the FY20 affordability threshold of $560,000, revealing a steep decline in accessible suburbs across the country.
Affordability Collapse Hits States Unevenly
The most severe shift has occurred in South Australia, where affordability has plummeted from 75 per cent of suburbs five years ago to just 25 per cent today. Adelaide’s median house price has surged nearly $500,000 over that period, illustrating the intensity of price growth in previously more accessible markets.
Similarly, Western Australia and Queensland have seen affordability drop from 60 per cent to 25 per cent of suburbs, driven by strong state economies, population growth and tightening supply. SQM Research forecasts dwelling prices in Perth to jump another 16 per cent in the coming year, with Brisbane and Adelaide close behind.
In Victoria, affordability slipped modestly, from 15 per cent to 10 per cent, as weaker economic conditions tempered price escalation. NSW remains the nation’s most expensive market, with only 5 per cent of homes affordable to a household earning $180,000, a figure unchanged in five years due to Sydney’s entrenched affordability ceiling.
Sydney Reaches Breaking Point
KPMG urban economist Terry Rawnsley notes Sydney may have hit its “affordability limit,” pushing many buyers into regional areas or other capital cities.
“We’ve seen people making some big jumps when it comes to where they’re looking to buy,” Rawnsley said, adding that others have resigned themselves to long-term renting.
New data from Cotality shows that even a dual full-time income household cannot buy a home within 30 kilometres of Sydney’s CBD without additional income, underscoring the widening gap between wages and dwelling prices.
Construction Crisis Limits Supply
The supply of new homes priced at $800,000 or below has steadily declined, as developers have shifted toward premium products in response to rising construction costs and a wave of builder insolvencies.
“These dwellings may be fewer in number, but they’re easier to sell and carry lower financial risk,” Rawnsley said, noting that essential workers are increasingly unable to live near their workplaces due to mismatched housing and labour market conditions.
The Australian Dream Persists, But with Compromises
Domain chief economist Nicola Powell argues that the aspiration for home ownership remains strong, even as affordability collapses. “The whole economics of Australia is really built up for us to own our homes by the time we get to retirement,” she said.
Powell believes shifting buyer behaviour, toward different dwelling types and locations, reflects a recalibration of expectations rather than abandonment of the dream. She also argues that technological innovation, including AI-driven planning tools and modular construction, may help improve access to affordable housing.
However, she warns that building alone will not resolve the crisis. “We need to think holistically… and ensure affordable homes for key workers in core locations, both for buying and renting,” Powell said.
The findings reveal a fundamental restructuring of Australia’s housing landscape. Markets once considered affordable, Adelaide, Brisbane and Perth, are now among the least accessible for first-home buyers. Without major intervention in supply, planning, and affordability policies, the gap between wages and house prices is likely to widen further, deepening generational divides and reshaping where Australians can realistically live and work.
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