Worst time on record for first-home buyers, new study reveals

A new study by analytics group FoundIt has identified the current market as the most challenging period for first-home buyers since records began in 1970. Despite recent price softening in some sectors and government support initiatives, high interest rates and stagnant wage growth have pushed the average home price to 10.2 times the median income. These conditions represent a significant hurdle for the Real Estate & Property sector as entry-level buyers face record debt levels and the risk of negative equity.

Research authored by Kent Lardner of FoundIt reveals that first-home buyers are facing unprecedented financial barriers, with 2026 marking the first year on record where a 10 per cent deposit requires more than a full year of the average wage. The study found that purchasing a median-priced capital city home now requires 10.2 times the average annual income, a sharp increase from 1989 when prices were only four times the typical income despite 17 per cent interest rates. Lardner describes the current environment as 'horrible,' noting that the massive debt required to enter the market is becoming increasingly expensive to service as interest rate hikes continue to outpace any minor price discounts.

While the broader property market has seen some price declines, these falls are largely concentrated in high-end properties, leaving the bottom-end market where first-home buyers typically operate relatively untouched or even rising. Ray White economist Nerida Conisbee warned that this creates a 'falling knife' scenario where entry-level buyers may purchase at a price peak just before values erode. Furthermore, the federal government's 5 per cent deposit scheme has come under fire; Lardner labeled it 'flawed' for driving price growth in the lower tier and exposing buyers to higher debt burdens, while LJ Hooker’s Mat Tiller noted that negative gearing reforms are keeping investor-owned entry-level stock off the market.

The disparity between the top and bottom of the market is stark, with Sydney’s bottom 25 per cent of sales dropping only 0.7 per cent compared to over 3 per cent at the top end. This lack of inventory and price resilience at the entry level, combined with reduced borrowing power, has led industry experts like Loan Market broker Julian Choo to suggest that government incentives may be relocating the financial burden rather than removing it. For the Real Estate & Property sector, these dynamics increase the risk of negative equity for participants in low-deposit schemes and suggest a prolonged period of volatility for first-time buyer activity as wages fail to keep pace with the cost of living.