Would-be first-time buyers are caught between a rock and hard place – either they buy at exalted prices, or they remain as tenants and pay exorbitant rents.
The first-time buyer market is turbo-charged due to government incentives that only seem to benefit sellers.
Yet, with rents also increasing dramatically, would-be buyers may still be best off buying in an overheating market.
According to Cotality, Australian rents have surged almost three times faster than wages over the past five years, pushing rental affordability to record lows and stretching household budgets across the country.
This coincides with first-home buyer activity accelerating sharply following the expansion of the federal Home Guarantee Scheme, with the value of new loans to this segment up 15.5 per cent over the three months.
Would-be buyers are struggling with a wicked problem – pay increased rents, or buy at exorbitant prices.
Cotality’s analysis shows national rents have jumped 43.9 per cent over the five years to September 2025, compared with a 17.5 cent rise in wages over the same period.
Meanwhile, the value of loans to first-home buyers reached $19.3 billion in the December quarter, the second-highest quarterly total on record and exceeded only by March 2021.
According to Cotality, since 2020, a combination of tight vacancy rates, smaller household sizes and sluggish new housing supply has pushed the market into a very different phase, one where rents are clearly in the driver’s seat.
Since then, tight rental markets, low vacancy rates and limited new supply have combined to push rents sharply higher while incomes have struggled to keep up.
With vacancy rates still around record lows in many markets and new housing completions running below what is needed to meet population growth, it is hard to see rents materially easing in the near term.
Meanwhile, while participation in the federal government’s first-home buyer scheme is on the up, it remains well below the June 2009 high of 49,499 loans – implying that prices may not completely get away with themselves.
First-time buyers may find themselves caught between the devil and the deep-blue sea but ultimately choose that buying in a hot market is the lesser-of-two-evils.
If you want to explore your options, buy v rent, message me and I will crunch some numbers with you.
Graeme Salt is an award-winning mortgage broker. For a no-obligations consultation on your home loan needs, please contact him on 02 9922 5055.
