A household on the median income, about $125,000 a year, could afford to buy 12% of the homes sold in Australia in the 2026 financial year. That is the lowest share since the realestate.com.au Housing Affordability Index began in 1995, below the 14% of the GFC year and a long way from the 43% of FY2021. Repayments on a median-priced home now absorb 35.5% of the average household's income, the highest share since 1989, when mortgage rates were 15.5%.
The twist is that prices are falling. Cotality's national index has dropped for five straight months and sat 3.6% below its March 2026 peak at 31 August. It has not helped, because three RBA rate rises pushed the average new variable rate from 5.8% to 6.3% and took more off borrowing capacity than the correction took off prices; PropTrack says the hikes "more than offset" both 4.5% income growth and the softer prices. This article puts the 2026 numbers in one table, then works through nine strategies that still get first home buyers in: who each suits, the number that matters, the catch, and where the deeper guide lives.
The 2026 affordability dashboard
| Metric | Value | As at | Source |
|---|---|---|---|
| Share of homes sold that a median-income household could afford | 12% (record low; 43% in FY2021) | FY2026 | realestate.com.au Housing Affordability Report, 5 Sep 2026 |
| Mortgage repayments on a median home, share of average household income | 35.5% (highest since 1989) | June 2026 | realestate.com.au |
| Years to save a 20% deposit, saving 20% of income | 6.0 years (5.8 in FY2025) | FY2026 | realestate.com.au |
| Dwelling value to income ratio | 8.2 (20-year average 6.8) | Sep 2025 quarter | Cotality Housing Affordability Report, Nov 2025 |
| Years to save a 20% deposit, saving 15% of income | 11.0 years | Sep 2025 quarter | Cotality |
| Share of income to service a new mortgage | 45.0% | Sep 2025 quarter | Cotality |
| Share of income to pay rent | 33.4% (series high) | Sep 2025 quarter | Cotality |
| Full-time adult ordinary time earnings | $2,083.70 a week, up 3.7% | May 2026 | ABS, 13 Aug 2026 |
| First home buyer loans | 29,319, down 2.9% on the quarter, flat on the year | June 2026 quarter | ABS Lending Indicators, 14 Aug 2026 |
| 5% Deposit Scheme guarantees issued since the 1 Oct 2025 expansion | 50,633 in nine months | to mid-2026 | Housing Australia data compiled by Guardian Australia, Aug 2026 |
| National median dwelling value | $912,885, down 3.6% from the March peak | 31 Aug 2026 | Cotality Home Value Index |
| National rents | up 5.7% over the year, about $38 a week | Aug 2026 | Cotality |
| Cash rate / average new variable rate | 4.35% / 6.3% | Aug 2026 / June 2026 | RBA via realestate.com.au |
Two "years to save" figures appear because PropTrack assumes an average-income household saves 20% of gross income while Cotality assumes a median-income household saves 15%. Both agree the hurdle grew in FY2026. First home buyers are still transacting, mostly with help: PropTrack's data shows the 5% Deposit Scheme's share of their loans roughly doubled, from about 25% to about 50%, after the October 2025 expansion.
1. Buy with a 5% deposit under the First Home Guarantee
Who it suits: buyers who can service a loan but cannot wait the years a 20% deposit takes.
The number: on Sydney's median unit of $878,176 at 31 August 2026, a 5% deposit is $43,909 against $175,635 for 20%, with no Lenders Mortgage Insurance because Housing Australia guarantees up to 15% of the value to your lender. Since 1 October 2025 there has been no income test and no cap on places, and 50,633 guarantees were issued in the first nine months, on Housing Australia data compiled by Guardian Australia. That counts guarantees issued, not settled purchases: PropTrack's equity analysis of the same cohort in August covered roughly 48,000 households that had actually bought, which is the smaller figure you will see quoted elsewhere. Price caps still apply, from $700,000 in Hobart to $1,500,000 in Sydney, with lower rest-of-state caps. Single parents and legal guardians can use the same scheme with a 2% deposit, and the separate regional guarantee was folded into it on the same date.
The catch: you borrow 95%, and Sydney values were already 7.1% below their February peak at the end of August. On a $700,000 purchase a 6.1% fall wipes your equity on paper, and after selling costs you are underwater at 2.6%, as the negative equity guide works through. Survivable if you hold; dangerous if you might need to sell within three years. Rules and caps are in the First Home Guarantee 2026 explainer.
2. Shrink the loan with Help to Buy shared equity
Who it suits: buyers whose income is the constraint rather than the deposit, who will accept the Commonwealth as a co-owner.
The number: the government contributes up to 40% of the price of a new home or 30% of an existing one in exchange for that share of the equity, and you need a 2% deposit. On a $700,000 established home the government's share is $210,000, your deposit $14,000 and your loan $476,000. At 6.3% over 30 years that is about $2,946 a month, against about $4,116 for a 95% loan on the same property. Applications opened on 5 December 2025 through participating lenders. On 1 July 2026 Housing Australia released 10,000 more places for 2026-27 and lifted the income limits to $103,000 for singles and $165,000 for couples and single parents; by then 4,800 applicants had settled or found a home. Price caps are the same or lower than the guarantee's: $1,300,000 in Sydney against the guarantee's $1,500,000, and $950,000 in Melbourne under both.
The catch: the government owns its share of every dollar of growth, you buy it back at market value, and the lender panel is still short: Bank Australia and the Commonwealth Bank at launch, joined on 27 July 2026 by Teachers Mutual Bank Limited's four brands. The trade-off is worked in full in Help to Buy versus going solo.
3. Buy in the tier that has held its value, and know what that means for units
Who it suits: buyers who want the least downside in a falling market rather than the biggest discount.
The number: over the three months to July 2026, upper-quartile values fell 3.2% nationally while the lower price tier gained 0.3%. PropTrack sees the same over a longer window: the most affordable homes have had the strongest growth since March 2020, which is why a household at the 25th income percentile could afford 1% of homes in FY2026 against 9% in FY2020. By August, Cotality reported lower-quartile values were "now also falling", but later and more slowly than the top.
For units this cuts two ways. Units fell less than houses in seven of eight capitals over the year to August, and in Brisbane, Adelaide, Perth and Hobart the guarantee cap sits below the median house, so a scheme buyer there is in practice a unit buyer.
The catch: the entry tier is where every scheme buyer competes, so there is little vendor discount to negotiate, and a cheap unit in a badly run building is not cheap. Our two-speed market analysis tracks the split.
4. Save the deposit inside super with the First Home Super Saver Scheme
Who it suits: anyone at least two years from buying whose marginal tax rate is 32% or higher.
The number: you can make voluntary contributions of up to $15,000 a financial year and $50,000 in total per person, then have them released to buy a first home. The ATO releases 100% of after-tax contributions and 85% of salary-sacrificed ones, plus deemed earnings, and taxes the withdrawal at your marginal rate less a 30% offset. The Conversation's May 2026 worked example at a 32% marginal rate: $10,000 taken as salary leaves $6,800 to save, while the same $10,000 salary-sacrificed becomes $8,500 inside super and about $8,330 when released, so you finish $1,530 ahead per $10,000. Across the full $50,000 cap that is roughly $7,650 before the earnings the ATO credits. A couple can each use the cap.
The catch: filling the cap takes four financial years, you must sign a contract to buy or build within 12 months of requesting the release, or such longer period as the ATO allows, and the contributions count toward your concessional cap alongside employer super, and if you change your mind after the money is released you must put it back into super or pay FHSS tax of 20% of the assessable released amount. There is no separate guide on this blog yet; read the ATO's First home super saver scheme pages.
5. Use your state's stamp duty exemption, and stay under the line
Who it suits: everyone buying an established home under the threshold, and in Queensland anyone buying new.
The number, state by state as at September 2026:
| State | First home buyer duty on an established home | New homes |
|---|---|---|
| NSW | Nil to $800,000, concession to $1,000,000 | Same |
| Victoria | Nil to $600,000, concession to $750,000 | Same |
| Queensland | Nil to $700,000, taper to $800,000 | Nil, no cap, from 1 May 2025 |
| Western Australia | Nil to $600,000, concession to $800,000, from 7 May 2026 | Same |
| South Australia | No relief on established homes | Full relief, no value cap, on a new home, an off-the-plan apartment or vacant land you build on |
Sources: Revenue NSW, "First Home Buyers Assistance Scheme"; State Revenue Office Victoria, "First home buyer duty exemption or concession"; Queensland Revenue Office, "First home concession" and "First home (new home) concession"; RevenueWA, "First Home Owner Rate of Duty" fact sheet, as at 28 July 2026; RevenueSA, "Stamp Duty Relief for Eligible First Home Buyers", accessed 7 September 2026.
The dollar effect is large. In a state with no established-home concession, full duty on a mid-range purchase runs to tens of thousands of dollars that a new build would avoid, which is why the new-versus-established choice is worth pricing before you shortlist.
The catch: the thresholds are cliffs or steep tapers on dutiable value, so a $10,000 win at negotiation can be worth far more than $10,000 if it drops the price under the line. Every state has a residence rule, so you cannot rent the place out: NSW and Victoria require 12 months, and South Australia wants six continuous months starting within a year of settlement. The calculations are in the 2026 stamp duty guide.
6. Rentvest if the suburb you want is out of reach
Who it suits: buyers whose job or family keeps them in an expensive city, but whose budget only works somewhere else.
The number: national gross rental yields reached 3.79% in August 2026, the highest since September 2019, and rents rose 5.7% over the year, so the income side of an investment property has rarely looked better relative to prices.
The catch: rentvesting forfeits most of the help on this list. The First Home Guarantee and Help to Buy are owner-occupier schemes, the state duty exemptions require you to live in the property, and the 2026-27 Budget's negative gearing and CGT changes start on 1 July 2027 for new holdings. The full trade-off is in rentvesting in 2026.
7. Co-buy with a written co-ownership agreement
Who it suits: siblings, friends, or a parent and adult child who each have an income but not enough alone.
The number: a second income changes the serviceability arithmetic more than any scheme does, because the lender's test is applied to combined household income, and since July 2023 any joint applicants, not only couples, can use the First Home Guarantee.
The catch: joint and several liability. Each of you is on the hook for the whole loan, and a co-owner who wants out in year three forces a sale or a refinance at whatever the market is doing then. Tenants in common with unequal shares, a signed agreement covering exits, valuations and default, and separate legal advice are the minimum. The structures and exit clauses are in the co-buying guide.
8. Buy regional or on the fringe, with the data in front of you
Who it suits: buyers who can commute a long way or work remotely, and who want a house rather than a unit.
The number: PropertyGo's suburb data, built from Valuer General sales to 31 July 2026 and limited here to suburbs with at least 30 house sales in 24 months, shows where a house still sits under the $800,000 NSW duty exemption and the $800,000 rest-of-state guarantee cap, plus Sydney's cheapest liquid house market with a train.
| Suburb | Region | Median house | House sales (24 months) | 12-month growth | Nearest train |
|---|---|---|---|---|---|
| Lithgow | Blue Mountains | $525,000 | 356 | 9.8% | 2.6 km |
| Taree | NSW North Coast | $565,000 | 591 | 10.8% | 0.5 km |
| Dubbo | Central West and Orana | $645,000 | 855 | 13.0% | 2.1 km |
| Cessnock | Newcastle and Hunter | $680,000 | 678 | 11.6% | 15.7 km |
| Orange | Central West and Orana | $720,000 | 760 | 9.5% | 2.7 km |
| Bradbury | South West Sydney | $910,000 | 297 | 10.6% | 2.4 km |
Source: PropertyGo suburb data as at 31 July 2026, 24-month median house price. Bradbury is the exception in the table: at $910,000 it sits above both the duty exemption and the rest-of-state guarantee cap, and is included as Sydney's cheapest liquid house market on a train line.
The catch: those growth columns are the problem as much as the opportunity. The affordable end has outrun everything else for four years, and Cotality's combined regional index fell 0.4% in August and 1.2% over winter, so the regional discount is no longer a one-way bet. Thin markets sell slowly in a downturn, and a two-hour commute never appears on the contract. The shortlist is in where first home buyers can still afford to buy in NSW.
9. Fix your borrowing capacity, because that is what binds now
Who it suits: anyone whose ceiling is set by a bank calculator rather than a bank balance.
The number: a $700,000 loan at the 6.3% average new variable rate costs about $4,333 a month over 30 years. With APRA's three percentage point buffer your lender tests you at about 9.3%, where the same loan costs $5,784 a month, and since 1 February 2026 each bank may write only 20% of its new lending at six times income or more. That is why capacity fell by more than prices did.
Three things move the number and you control all of them. Credit card limits are assessed as debt whether or not you use them, so cancel what you do not need. HELP debt has been excluded from the debt-to-income ratio since 30 September 2025, but it still reduces serviceability unless your lender applies APRA's June 2025 exception for balances about to be cleared, so a small remaining balance may be worth paying out. And lender policy on overtime, bonuses and casual income varies enough that the same file can produce very different approvals, which is where a mortgage broker earns their fee.
The catch: a pre-approval is reassessed at formal approval, so one issued before a rate decision is worth less than it looks. The mechanics are in the borrowing capacity guide.
What no longer works in 2026
Waiting for rate cuts alone. CBA's economists do not expect the first cut until 2027, and when it comes it returns capacity to every buyer at once. PropTrack expects affordability to improve only "marginally" in the near term while supply stays constrained.
A guarantor loan as a serviceability fix. A parental guarantee covers the deposit gap and removes LMI. It adds no income, so it does nothing for the serviceability test or the debt-to-income ratio, and the deposit is no longer the binding constraint. It also puts your parents' home behind your loan in a falling market.
Buying off the plan without checking the builder. Queensland's uncapped first home duty exemption on new homes, and comparable state relief elsewhere, push first home buyers toward new builds. The concessions are real, and so is builder failure. Check the builder's licence, insurance and recent completions, and read the sunset clause, before paying a deposit on anything unbuilt.
Frequently asked questions
Is 2026 a good year to buy a first home?
It is a good year to negotiate and a hard year to borrow. Listings were 24% above a year earlier at the end of August 2026 and values had fallen for five months, but the assessment rate is about 9.3% and the median-income household can afford 12% of homes. If your capacity is confirmed, the conditions favour you. If you are stretching to a 95% loan in Sydney or Melbourne, buy only what you can hold through the cycle.
How much deposit do I really need?
On the national median dwelling of $912,885 at 31 August 2026, a 20% deposit is $182,577, a 5% guarantee deposit is $45,644 and a 2% Help to Buy deposit is $18,258, plus purchase costs in each case. About half of first home buyers now use the 5% scheme. The trade is a bigger loan and higher repayments.
What income do I need for a $700,000 loan at 2026 rates?
The repayment at 6.3% is about $4,333 a month, or $52,000 a year. On the conservative test PropTrack uses, 30% of gross income at the assessment rate, a $700,000 loan needs household income of roughly $230,000; at the actual rate the same test gives about $173,000. Lender calculators work from net income and living-cost benchmarks and usually land between those figures, so get a written assessment.
What to do now
Start with the constraint that actually binds. If a broker's assessment says capacity is the problem, work strategies 9, 7 and 2 first; if the deposit is the problem, strategies 1, 4 and 5 do most of the lifting. Then choose the market, and check the price cap for that exact suburb before you look at a listing.
Run three numbers on any property before you offer: the repayment at 6.3%, the repayment at 9.3%, and how far the price can fall before your equity is gone. Then get the two people who move the outcome: a broker who knows which lenders treat your income well, and a buyer's agent who knows what the entry tier in your suburb has actually sold for since the market turned. GoMatch will pair you with a vetted buyer's agent for free. Every figure here was checked in the first week of September 2026, and most move quarterly, so confirm the current version before you sign.
Sources
- realestate.com.au and PropTrack, "Housing Affordability Report 2026", Angus Moore and Luc Redman, 5 September 2026.
- Cotality, "Housing Affordability Report Australia", November 2025 (September 2025 quarter data).
- Cotality, "Home Value Index", results as at 31 August 2026, released 1 September 2026.
- Cotality, "Australia's housing market downturn widens", 3 August 2026.
- Australian Bureau of Statistics, "Lending Indicators, June Quarter 2026", 14 August 2026.
- Australian Bureau of Statistics, "Average Weekly Earnings, Australia, May 2026", 13 August 2026.
- firsthomebuyers.gov.au, "Australian Government 5% Deposit Scheme", accessed 7 September 2026; Housing Australia, "Home ownership a reality for over 300,000 Australians", 30 March 2026.
- MacroBusiness, "50,000 first home buyers face painful adjustment", 7 August 2026, citing Housing Australia data compiled by Guardian Australia.
- firsthomebuyers.gov.au, "Australian Government Help to Buy Scheme", "Help to Buy property price caps", "Help to Buy income and threshold updates 2026-27" and "Help to Buy participating lenders", accessed 7 September 2026; Housing Australia, media releases, "More Australians set to benefit as Help to Buy expands from 1 July 2026", 1 July 2026, and "Teachers Mutual Bank Limited joins Help to Buy", 27 July 2026.
- Australian Taxation Office, "First home super saver scheme", including "About the FHSS scheme", "About FHSS release amounts" and "FHSS tax assessment", accessed 7 September 2026; The Conversation, "This little-known scheme can help first home buyers save thousands more for a deposit, with less tax", 21 May 2026.
- Revenue NSW, "First Home Buyers Assistance Scheme" and "Calculate transfer duty"; State Revenue Office Victoria, "First home buyer duty exemption or concession"; Queensland Revenue Office, "First home concession" and "First home (new home) concession"; RevenueWA (Department of Treasury and Finance), "Duties Fact Sheet: First Home Owner Rate of Duty", as at 28 July 2026. All accessed 7 September 2026.
- Australian Prudential Regulation Authority, "APRA to limit high debt-to-income home loans to constrain riskier lending", 27 November 2025.
