Australian first-home buyers have seen their purchasing power collapse over the past five years.
New analysis from KPMG shows the share of homes within reach for an average entry-level household has more than halved since 2020.
The “Big 4’ accounting and forecasting firm has also found that in 2025, first-home buyers must earn above average salaries to have any hope of owning their own home.
The details
KPMG’s analysis shows a first-home buyer household earning about $180,000 a year in 2025 can afford just 12% of the national housing stock.
Five years ago, a typical first-home buyer household earned about $150,000, and could access roughly 30% of homes on the market.
KPMG Urban Economist Terry Rawnsley says the shift reflects the rapid transformation of who can now afford to buy property.
“In just five years, the face of first-home buyers has changed dramatically,” he says.
“Median home prices continue to soar, but average first-home buyers aren’t targeting median-priced homes.
“Instead, they’re seeking more affordable options, focusing on regional markets or competing for a shrinking pool of apartments and greenfield homes in major cities.”
Mr Rawnsley says home loan data shows first-home buyers must earn substantially more than the typical Australian household to service a standard mortgage.
They now require household incomes of about $180,000, well above the average household income of roughly $145,000 for two full-time workers.
Even using that higher household income benchmark, affordability in some states has deteriorated sharply, while in others, it’s at a standstill.
KPMG says South Australia now ranks as the most accessible state for first-home buyers, with 25% of housing stock within reach.
But in 2020, the same income could secure more than 75% of homes.
Around 25% of homes on the market in Western Australia and Queensland are affordable for first-home buyers, but that’s down from 60% five years ago.
Victoria has seen a smaller drop - from 15% to 10%.
The least affordable state for first-home buyers is New South Wales.
In 2025, households with a total income of $180,000 can afford just 5% of homes in the state, the same share as five years ago.
“The fact the pool of affordable properties in New South Wales remains unchanged over five years despite house price increases suggests it may have reached the limit of unaffordability,” Mr Rawnsley says.
KPMG says its analysis aligns with data from the Australian Bureau of Statistics, showing median home prices have surged between 2020 and 2025: up 40% in New South Wales, 20% in Victoria, a stunning 80% in Queensland and South Australia, and 75% in Western Australia.
“The sharp rise in house prices across WA, QLD, and SA over the past five years has significantly reduced the share of the market accessible to first-home buyers and meant these regions now face the same challenges as traditionally unaffordable markets of NSW and Victoria,” Mr Rawnsley says.
The KPMG Urban Economist says boosting the supply of housing is essential, but only if new homes are delivered at affordable prices.
“Housing supply needs to be considered not just in terms of absolute numbers of new homes being delivered, but also at what price point they are being delivered,” he says.
KPMG found that new dwellings priced at $800,000 or less have fallen sharply as a share of total supply.
Only about 12% of new homes in 2025 fall into that category, down from one-third in 2023.
Mr Rawnsley says developers have shifted towards higher-end projects in response to market pressures.
“Rising construction costs and higher interest rates have reshaped the housing market,” he says.
“Since 2022, a wave of builder insolvencies has pushed developers to pivot toward premium, high-end projects.
“These dwellings may be fewer in number, but they’re easier to sell and carry lower financial risk, marking a clear shift away from affordable housing supply,” he says.
Mr Rawnsley notes that while construction costs are easing and planning reforms are starting to improve the outlook, far more targeted action is needed.
“Easing of construction costs and cheaper capital, combined with the raft of planning changes occurring at the state and federal level, are now helping boost housing supply.
“But more work is needed to target the supply of affordable housing to really help first-home buyers,” the KPMG analyst says.