Key takeaways:
Location shapes affordability: Similar incomes and borrowing power can translate into very different buying opportunities depending on local property prices.
Buyers are adapting: Some Australians are broadening their search by considering different suburbs, regions or property types that better fit their budget.
Borrowing less may be a choice: Buying below your maximum borrowing capacity may help create a financial buffer and support longer-term goals.
Preparation matters: Understanding your borrowing power before you start searching may help you focus on homes that align with your budget and circumstances.
Two Australians earn the same income.
They've saved the same deposit amount, have similar financial commitments and receive the same home loan approval.
Yet one may be able to buy a detached house, while the other may find their budget only stretches to a unit.
The difference isn't necessarily their financial position. It's where they're trying to buy.
A new KPMG analysis combining Census and ABS housing survey statistics with rental bond data to estimate owner-occupier rates suggests Australia's home ownership landscape is becoming increasingly divided by geography, with ownership rates strengthening in Queensland and Western Australia while declining in some of Australia's most expensive housing markets.
Australia's home ownership landscape is becoming increasingly divided by geography, with ownership rates strengthening in Queensland and Western Australia while declining in some of Australia's most expensive housing markets.
For buyers, that's a reminder that affordability is no longer just about income or loan approval. Increasingly, it's about what those finances can realistically buy in different parts of Australia.
Why the same income can lead to very different outcomes
Borrowing capacity is calculated using factors such as income, expenses, existing debts and interest rates. But once buyers start looking for a home, local property prices quickly become the deciding factor.
Two households approved to borrow the same amount could find themselves searching for entirely different types of properties depending on where they're buying.
In some markets, that borrowing capacity may stretch to a family home. In others, it may only cover a smaller apartment or townhouse.
That doesn't mean one location is a better choice than another. Employment, lifestyle, family commitments and long-term goals all play a role. But it does mean location has become one of the biggest influences on what home ownership looks like for many Australians.
While borrowing capacity is influenced by income, expenses, existing debts and interest rates, local property prices ultimately determine what buyers can afford.
Dean Hammond of Aussie Ashfield said affordability had become the biggest hurdle for many aspiring buyers.
“It's straight-out affordability. Can you afford the home loan? At the end of the day, that's all that's holding most renters up,” he said.
Hammond said conversations with clients increasingly centred on borrowing power rather than saving a deposit.
“Most of them just wanted to know how much they could borrow,” he said.
“Those were the conversations we are having. They were around affordability and how the banks assessed borrowers more so than anything else.”
More buyers are broadening their property search
For many Australians, affordability isn't changing the goal of buying a home. It's changing where they search.
Alexis Magri of Aussie Ryde said buyers whose preferred location had moved beyond their budget were increasingly widening their search rather than abandoning their plans altogether.
"At the end of the day, the borrowing range is based on their income. If they can't service a loan in a certain area, they just have to look elsewhere," he said.
“Maybe they can't buy a house in Sydney, but they could buy a house interstate for half the price.”
A household that may be able to afford a detached home in one regional market may find the same budget only stretches to a townhouse or apartment in parts of Sydney or Melbourne. That broader shift appears to be reflected in Aussie's own lending data.
While first-home buyers continue to make up almost half of all purchase applications (47.5%), the locations attracting those buyers continue to evolve, with both metropolitan growth corridors and regional markets featuring strongly.
Rather than suggesting Australians are giving up on home ownership, recent Aussie lending data suggests many are adapting their expectations by considering different suburbs, regions or property types that better align with their budget.
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Affordability isn’t about borrowing the maximum
A higher borrowing capacity doesn't automatically mean buyers should borrow to their limit.
Magri said many first-home buyers were consciously choosing to purchase below their maximum borrowing capacity.
“A lot of them were actually buying under budget anyway. They're not usually trying to stretch to their maximum borrowing capacity,” he said.
“It's their first home as well, so it's not going to be their forever home. That's normally the position we take. We ask them, 'Do you really want to stretch yourself that much?'”
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She said buyers often focused on the purchase price without considering what servicing a larger loan could mean over the long term.
“I think it comes down to how much buffer they actually have," Magri added.
“A common misconception is that they need to buy their first house and it'd be their long-term home for the next five or 10 years.”
For some buyers, choosing a smaller home, a different property type or another location may provide greater financial flexibility while creating an opportunity to upgrade later.
Recent internal Aussie data between July 2024 to June 2026 found that while houses remain the most common purchase type for first-home buyers, apartments and townhouses continue to provide an important entry point into the market, particularly in more expensive metropolitan areas.
What if your preferred suburb is out of reach
If buying in your ideal location isn't currently possible, it doesn't necessarily mean home ownership is out of reach.
Depending on their circumstances, some buyers may consider a range of options, including:
expanding their search to neighbouring suburbs
considering apartments or townhouses instead of detached homes
looking at regional locations
exploring interstate markets where prices may better align with their borrowing capacity
viewing their first property as a stepping stone rather than a forever home.
The right approach will depend on individual circumstances, financial goals and lifestyle priorities. Rather than comparing yourself with buyers in different markets, it may be more useful to focus on what is realistic for your own budget and long-term plans.
Understanding your borrowing power before you start searching
While no one can predict exactly how property markets will move, buyers can prepare by understanding what may be achievable before they begin house hunting.
Magri said buyers who already had a deposit and stable income often benefited from obtaining pre-approval early.
“My advice is that if you're ready, you've got the deposit, and your borrowing capacity is there, get a pre-approval,” he said. “You never know what's going to come onto the market.”
Knowing your borrowing power won't determine where you should buy, but it can help narrow your search, compare different scenarios and make decisions with greater confidence.
Two households with similar incomes may continue to face very different home buying opportunities depending on where they choose to buy. While buyers can't control local property prices, they can control how well prepared they are.
Understanding your borrowing power and exploring different options may help you make more informed decisions about what could be achievable. An Aussie Broker can help you compare loan options and understand what may be possible based on your circumstances.