The Australian Government has systematically dismantled housing affordability over the past decade. Their actions have created relentless upward pressure on prices through three distinct waves:
Wave 1: A Shortage of New Dwellings
In 2014/15, around 219,000 new homes were built each year. Today, completions have fallen to just 158,000. A chronic undersupply has built the foundation for rising prices.
Wave 2: Record Net Migration
Net overseas migration has more than doubled from 180,000 in 2014/15 to 446,000 today, adding immense demand to a market already constrained by supply.
Wave 3: The First Home Buyers Scheme
The latest scheme has fuelled demand by allowing first-home buyers to enter the market earlier with smaller savings. Instead of easing affordability, it has pushed prices higher, faster.
What does this mean today?
There is no better time than now to make a purchase. Tomorrow will be more expensive.
- In some suburbs, prices have climbed almost 10% in a single month.
- First-home buyers are rushing to purchase before they’re priced out.
- Savvy investors are also piling in, keen to capture short-term gains.
A $1.2m property today could be worth $1.5m in the near future as desperate demand continues to exceed supply.
What happened last time the Government introduced an incentive?
Back in 2000 the Government introduced the First Home Owners Grant (FHOG or FHBG) to the value of $7,000 and then doubled it in 2014 for a year before phasing it out.
A study by Blight, Field & Henriquez (Deakin) argued that from 2000 to 2008, median house prices nearly doubled (well above CPI) and attributed a portion of that to the effect of the FHBG, via greater borrowing capacity plus inelastic housing supply. They estimated that the FHBG increased median house prices by approximately $57,321 (during that period) relative to what they would have been otherwise.
What does the future hold?
If you don’t already have a deposit and borrowing capacity, you risk being permanently priced out. Housing affordability is become more difficult for most with many first home buyers turning to rentvesting.
Government price caps aren’t caps at all; they become new floors. For example, with Sydney’s cap rising to $1.5m from October, homes currently just under that figure will rapidly reset upwards, dragging higher-priced stock along with them.
What we have already seen in September (2025)
- Properties that should have sold for “X” just weeks ago are now selling for X + 10%.
- Buyers are chasing ownership at all costs, regardless of underlying value.
- The First Home Buyer Scheme has acted as an accelerant on top of already critical supply shortages.
What should you do now?
For First Home Buyers
If you have a deposit and loan approval, don’t wait. The market has already started to shift and any delay will see you priced out of your perfect location.
For Investors
Be strategic. Avoid overcrowded “hotspots” where short-term growth is investor-driven. Focus instead on owner-occupier locations, where long-term capital growth is stronger.
For Home Upgraders
If you are looking to upgrade in the current market, try to buy just above the $1.5m price point, where you won’t have the competition from first-home buyers using the scheme. To ensure you manage housing affordability in a growing market like this, it is critical that you buy and sell int he same market.
For Those Not Yet Ready
- Consider family or friends as partners to get a foot on the ladder.
- Start planning now, as prices are likely to increase by 5–10% annually in areas subject to the new caps.
- Speak to a broker, as lower interest rates and reduced deposit requirements mean you might be able to get into the market
