First home buyers are struggling to enter the market

A RISE in inflation that has outstripped wage growth is seriously undermining the chances of first home buyers realising their dreams.

This is the outcome shown in a new report from real estate website Domain titled First Home Buyer Report 2026.

Over the past five years, the Report shows inflation has risen 23 per cent while wages have only increased 21 per cent.

During the same period, entry house prices nationally have jumped 68 per cent, while entry unit prices climbed 30 per cent.

“In 2026, first home buyer affordability is being reshaped less by interest rates alone and more by the pace of growth in entry-level prices, which has accelerated sharply in several mid-priced capital cities,” the Report concluded.

“As a result, saving a deposit is taking longer in most markets, while mortgage repayments remain stretched once buyers enter the market.”

The Report showed affordability outcomes are fragmenting across cities.

The time required to save a deposit now ranges from two years and seven months for an entry-priced unit in Darwin to seven years and seven months for an entry-priced house in Sydney.

“The gap between the shortest and longest savings timelines continues to widen, reflecting divergent price and income dynamics across the capitals.”

Sydney continues to record the longest saving time for entry-priced houses but pressure has broadened, the Report said.

“Sydney remains the city with the longest time to save for an entry-priced house deposit. Brisbane is in second place, followed by Adelaide and Perth, as rapid entry-level price growth has significantly extended saving timelines in these markets.

“The unit ‘safety valve’ is breaking down in some capitals. For the first time on record, Brisbane has overtaken Sydney as having the longest time required to save for an entry-priced unit.

“Adelaide and Perth have also moved up the rankings, indicating that units are no longer universally providing relief for first-home buyers.

“Income strength is increasingly influential. Canberra stands out as a relative outlier. Modest house price growth, declining entry-level unit prices and the highest average incomes among the capitals have resulted in shorter saving timelines and more favourable mortgage serviceability outcomes, despite high absolute prices.

“Melbourne’s unit market shows a similar, though less pronounced, pattern.

“Mortgage stress remains widespread despite rate cuts in 2025. Interest rate reductions in 2025 have slowed further deterioration in serviceability but have not reversed it.

“All capital cities remain above the mortgage stress threshold for entry-priced houses and mortgage stress for entry-priced units is now evident in Sydney, Brisbane and Adelaide.

The Report said, taken together, these outcomes show that first-home buyers in 2026 face a dual affordability constraint: deposits are taking longer to accumulate and repayments remain elevated once buyers enter the market.

Over the past five years, the time required to save a deposit has increased in almost every capital city, with the key exceptions being Melbourne overall and units in Sydney, Canberra and Hobart.

Melbourne units recorded the largest improvement, with saving times falling by one year, driven by declining entry-level unit prices, strong wage growth and a higher savings-rate environment over much of the period.

Units in Sydney and Canberra have also become quicker to save over five years, reflecting relatively modest unit price growth alongside strong income gains.

In contrast, Sydney houses recorded a significant deterioration, with saving times increasing by 17 months, highlighting the widening affordability gap between houses and units.

The largest five-year increases in saving times were recorded in Adelaide, Brisbane and Perth, where rapid growth in entry-level house and unit prices has far outpaced wage growth.

These shifts have reshaped affordability rankings across the capitals, pushing several traditionally more affordable cities toward the least accessible end of the spectrum.

The Report concluded that barriers to first-home ownership are being shaped by a combination of large deposit requirements, transaction costs, lending constraints and elevated mortgage burdens, which together delay or prevent market entry for aspiring buyers.

“The evidence suggests that policies focused solely on demand or interest rates are unlikely to deliver lasting improvements in affordability,” it said.

“Instead, outcomes for first-home buyers are most sensitive to upfront costs, particularly the size of the deposit required to enter the market.

“From an affordability perspective, the most impactful policy levers are those that reduce barriers to entry and improve mobility, rather than those that simply accelerate demand.

“With home ownership rates declining – particularly among younger Australians – the evidence points to a growing need to address the structural drivers of affordability.

“Doing so will require coordinated, sustained action across all levels of government, supported by industry and the community sector, to ensure that home ownership remains an achievable and sustainable goal over time.”