First-home buyers are entering the market despite rising interest rates, prioritising getting in over waiting for better conditions
Lower-priced homes are outperforming the market, rising 6.7% compared to 3.6% for higher-priced properties, as demand concentrates at the entry level, according to new data from Cotality Data
The First Home Guarantee scheme is helping buyers enter sooner, but is also driving demand in the more affordable segments
Buyers are finding ways to enter the market sooner by adjusting expectations and exploring different locations or property types.
Competition for affordable homes is increasing, particularly in entry-level segments favoured by first-home buyers.
Properties under the First Home Guarantee price caps have recorded significantly stronger growth than higher-priced homes in recent months, according to a new Cotality analysis released on Thursday.
At the same time, the pool of accessible housing is shrinking, with the share of suburbs falling under the scheme’s price caps dropping from 48.6% to 39.5% in just six months.
While the scheme is helping more Australians get into the market, it is also intensifying competition in the very segments buyers rely on, contributing to price growth in more affordable segments.
Smaller budgets, more flexibility
For Sydney first-home buyer George Goodman, buying a home was on the cards sooner rather than later.
“I had saved up for more than five years ... and didn’t really have a clear plan,” he said.
“When I first started looking, my expectations were quite high because I knew my borrowing capacity and thought I could get a fancy apartment with all the extra additions.”
However, after numerous conversations with his broker, Goodman’s property priorities began to shift. He ultimately purchased a two-bedroom apartment in Waterloo, choosing to buy below his maximum borrowing capacity to maintain a financial buffer and preserve lifestyle flexibility.
“I had to adjust my expectations and buy at a lower price point … so I have something that is not as high-end, but it’s still a place in Sydney.”
For buyers, acting early and having a clear view of your borrowing capacity can make a significant difference.
Lower-priced homes outperform as demand surges under buyer schemes
Across Australia, a new wave of buyers is emerging: more strategic and flexible in how they approach their first purchase, experts say.
The First Home Guarantee scheme appears to be amplifying demand in more affordable segments, while also increasing competition, the analysis found.
In the first six months after the scheme was expanded, these lower-priced homes rose in value by 6.7%, compared to a 3.6% increase for higher-priced properties.
Portion of suburbs with a median value at or below price caps, Sep 2025 v March 2026
City/Region | Price Cap | Sep-25 Houses | Sep-25 Units | Mar-26 Houses | Mar-26 Units |
|---|---|---|---|---|---|
Sydney | $1,500,000 | 47.8% | 90.9% | 46.8% | 90.2% |
Melbourne | $950,000 | 39.2% | 93.8% | 38.7% | 93.4% |
Brisbane | $1,000,000 | 42.2% | 95.2% | 28.7% | 86.4% |
Adelaide | $900,000 | 45.1% | 100.0% | 24.9% | 98.7% |
Perth | $850,000 | 33.3% | 88.8% | 11.6% | 72.6% |
Hobart | $700,000 | 49.0% | 88.9% | 40.4% | 86.7% |
Darwin | $600,000 | 32.4% | 100.0% | 10.3% | 95.2% |
ACT | $1,000,000 | 43.7% | 100.0% | 34.1% | 97.8% |
Rest of NSW | $800,000 | 68.0% | 90.1% | 62.3% | 90.6% |
Rest of Vic. | $650,000 | 69.5% | 100.0% | 61.4% | 100.0% |
Rest of Qld | $700,000 | 44.2% | 85.5% | 34.2% | 76.6% |
Rest of SA | $500,000 | 50.6% | 100.0% | 44.7% | 100.0% |
Rest of WA | $600,000 | 47.1% | 100.0% | 32.1% | 100.0% |
Rest of Tas. | $550,000 | 47.0% | 100.0% | 26.1% | 75.0% |
National | n/a | 48.6% | 92.7% | 39.5% | 89.1% |
This shift reflects a growing concentration of demand at the lower end, where both first-home buyers and investors are competing for a shrinking pool of affordable stock.
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Rising rates are cutting borrowing power for first-home buyers
Aussie broker Greg Shortland said timing became one of the biggest challenges for first-time buyers.
“Generally, we normally see first home buyers take an average of about six months to actually find their first home ... [but] you might be able to get your first pre-approval and hold that for three months,” he said.
“In the current market, if there have been one, two, or three rate changes between; you have probably lost anywhere between $20,000 and $60,000 in borrowing capacity.”
That dynamic is encouraging faster decisions and clearer priorities.
“If their borrowing capacity drops, that impacts their purchase price,” Shortland added.
“Usually, it is only the absolute top end that is impacted from a [purchase] price perspective. When those buyers lose borrowing capacity, they move down to the next bracket, and it flows through the market.”
Buyers explore new locations as affordability pressures grow
Buyer's agent Frankie Webber is seeing that play out on the ground, particularly in markets like Newcastle and the Central Coast.
“I have first-home buyers who might want to buy closer to the Newcastle CBD, but if they are looking for a three- or four-bedroom freestanding house, they have to look further west,” he said.
Budgets are typically starting from around $800,000, he said, with many buyers willing to compromise on property type or location to enter the market sooner.
Many buyers are continuing to move forward with clear goals and realistic expectations.
“First-home buyers are probably better at adjusting their expectations than people who have bought before. They tend to take the approach of just wanting to get their foot in the door,” he said.
“But they also understood that the property market is cyclical and they if they can ride it out, even if it dips, it will come back up again.”
Property market moderates as interest rates influence affordability
That long-term view is critical in the current environment, according to AMP chief economist Shane Oliver.
After strong growth of 8 to 9 per cent nationally last year, that has begun to slow, according to Cotality’s national home value index.
The price slowdown has been prominent in Sydney and Melbourne, where prices have flatlined or edged lower amid higher interest rates and affordability constraints.
At the same time, mid-sized capitals such as Brisbane, Adelaide and Perth have continued to perform more strongly, supported by relative affordability and population growth.
Further rate rises could add to the pressure.
What rising interest rates mean for your borrowing power
For buyers, this means even small rate changes can affect both your repayments and how much you can borrow, making it important to review your position regularly.
On a $700,000 loan over 30 years, repayments could increase by around $336 per month, or approximately $4,028 per year.*
“For new borrowers, it reduces the price that they can pay for a property making the housing market even less affordable,” Oliver said. “They may even be priced out of certain segments of the market or need to look at cheaper properties.”
This is where speaking with a broker can make a real difference.
A quick check can help you understand how rate changes affect your borrowing capacity, and whether there are loan options that better suit your current situation.
While rate changes can reduce borrowing power, then can also slow price growth and potentially create opportunities for buyers who are prepared and ready to act.
Reviewing your borrowing capacity before making an offer, and keeping it up to date, can help you move quickly and confidently when the right property comes up.
Why first-home buyers are choosing to act now
For buyers like Goodman, market conditions reinforced the decision to act sooner rather than later.
“I didn’t want Sydney to move out of reach,” he said.
Initially considering rentvesting or buying interstate, he instead worked with a broker to identify suburbs within his budget, ultimately adjusting his expectations around property type and location.
“I had to shift from thinking about a forever home to thinking about the next 10 years,” he said.
“You can have your materialistic wants, your goals and dreams, it’s still achievable... but being able to readjust my expectations and go in at a lower price means that I don’t have anxiety about rate rises and the like.”
Next steps:
Whether you’re ready to buy or still weighing your options, taking the next step can help you stay ahead in a changing market.
Reviewing your borrowing capacity, exploring different property types or locations, and understanding how rate changes could impact your repayments are all good places to start.
An Aussie broker can help you assess where you stand, compare loan options from a wide range of lenders, and identify opportunities to buy within your budget, while keeping a financial buffer in place.
Even if you’re not ready to purchase yet, getting expert guidance early can help you plan with more confidence.