Australia's housing market is becoming increasingly difficult for average-income households, with higher interest rates and rising property prices making it harder for many Australians to qualify for home loans.
According to comments from Jonathon Mott, head of banks research at investment banking firm Barrenjoey, access to housing finance has become increasingly concentrated among wealthier households.
Mott made the comments during a parliamentary inquiry into productivity, where he discussed major changes in Australia's housing finance market over the past two decades.
Higher Interest Rates Reduce Borrowing Capacity
Mott said higher interest rates since 2023 have significantly reduced the borrowing capacity of households under responsible lending requirements enforced by Australia's financial regulators.
At the same time, rising house prices have made it even more difficult for first-home buyers and middle-income households to enter the property market.
He highlighted data from Commonwealth Bank of Australia through December 2025, saying that significantly more lending was going toward investors earning more than $500,000 per year compared with households earning less than $125,000 per year who were buying their own homes.
Mott described the situation as evidence that housing has increasingly become a luxury in a high-inflation and high-interest-rate environment.
Housing Affordability Becomes a Major Concern
Senator Andrew Bragg, chair of the committee, described the figures as "shocking" and questioned what could be done to address the issue.
Mott said Australia needs to increase housing supply to meet rapid population growth.
He argued that the country needs to build more houses and apartments while improving the movement of existing housing stock. He also suggested that older Australians who have become empty nesters could move into more suitable homes, potentially freeing up larger properties for younger families.
According to the latest Australian Bureau of Statistics data cited in the report, the mean price of residential dwellings reached $1,111,100 in the March 2026 quarter, up from $1,002,500 in March 2025 and $959,300 in March 2024.
The sharp increase in property prices has added to affordability pressures for people trying to purchase their first home.
First-Home Buyers Face Growing Challenges
Australia's federal government has introduced measures designed to help eligible buyers enter the housing market, including a 5 percent deposit scheme.
However, concerns have been raised that increased demand from government-backed schemes could contribute to higher prices, particularly for entry-level properties.
Mott said the biggest challenge facing first-home buyers is ultimately the combination of housing affordability and supply.
As home prices rise, households with average incomes may find it increasingly difficult to save a deposit and meet banks' borrowing capacity requirements.
Banks Are Not to Blame, Barrenjoey Says
Mott argued that Australian banks should not be blamed for the current situation.
He said competition in the housing finance market remains strong and that banks have continued to lend significant amounts of money to the housing sector.
According to figures cited by Mott, owner-occupied housing credit increased by 42 percent over three years, while investor finance rose by 85 percent.
He also said banks had provided approximately $400 billion in new housing credit over the previous year, with housing credit growth running at around 7.5 percent annually.
The figures suggest that credit remains available, but affordability is preventing many potential buyers from taking advantage of it.
Home Loan Applications Fall Sharply
Despite strong competition among lenders, external economic pressures have affected demand for home loans.
Mott pointed to interest-rate increases, geopolitical tensions and tax changes as factors contributing to weaker housing activity.
Research published by Barrenjoey using data from Loan Market Group reportedly showed that home loan applications had fallen by approximately 23 percent since the beginning of February.
The decline affected different groups of borrowers:
- First-home buyer applications: Down 19%
- Owner-occupier upgrader applications: Down 15%
- Investor applications: Down 35%
Mott said the decline was not primarily due to tighter bank underwriting standards. Instead, the main issue was that housing affordability had become increasingly stretched.
The Bigger Problem: Housing Affordability
The Australian housing market is facing a difficult combination of high property prices, borrowing constraints and changing interest-rate conditions.
While banks continue to compete for customers and provide substantial housing finance, many Australians on median incomes are finding it increasingly difficult to qualify for enough borrowing to purchase a home.
The situation highlights a broader challenge facing Australia: increasing housing supply while keeping properties affordable for first-home buyers and middle-income households.
Key Highlights
| Particulars | Details |
|---|---|
| Country | Australia |
| Main Issue | Housing affordability and access to home loans |
| Investment Firm | Barrenjoey |
| Key Analyst | Jonathon Mott |
| High-Income Investor Benchmark | More than $500,000 annual income |
| Lower-Income Household Benchmark | Less than $125,000 annual income |
| Mean Residential Property Price (March 2026) | $1,111,100 |
| Mean Residential Property Price (March 2025) | $1,002,500 |
| Mean Residential Property Price (March 2024) | $959,300 |
| Owner-Occupied Credit Growth (3 Years) | 42% |
| Investor Finance Growth (3 Years) | 85% |
| New Housing Credit (Past Year) | About $400 Billion |
| Annual Housing Credit Growth | About 7.5% |
| Home Loan Applications | Down About 23% Since Early February |
| First-Home Buyer Applications | Down 19% |
| Owner-Occupier Upgrader Applications | Down 15% |
| Investor Applications | Down 35% |
| Key Challenge | Rising property prices and stretched housing affordability |
0 Comments