Bought out before they begin: Prices, debt and thin supply have turned the first rung of the ladder into a very high jump

There is a line doing the rounds in overseas journals and podcasts about the death of the first-time home buyer.

In Australia, I would not call it death just yet. But it is certainly prolonged suffocation.

The desire is still there. The aspiration is still there.

The cultural pull of owning your own home remains deeply embedded.

But the practical pathway into ownership has become narrower, steeper and more dependent on luck, timing, parental help, or some combination of all three.

Let’s start with the blunt bit

The median price of Australia’s dwelling stock reached just shy of $1.1 million in the first quarter of this year. That is not a middle purchase price.

It is broader than that. It tells you where the centre of gravity now sits in our housing system. Above the million-dollar mark.

Now layer in what it takes to buy

The National Housing Supply and Affordability Council reported that a median-income household needed about 11 years to save a deposit, while around 50% of median household income was required to service repayments on a new mortgage.

Half your income just to hold the debt. That is not a housing ladder. That is a stress test.

And then there is interest rates

The Reserve Bank will most likely lift the cash rate to 4.35% next month. In a country like Australia, where housing debt is already huge, that matters enormously. Higher rates do not just hurt sentiment. They slash borrowing capacity and force first-time buyers to either pay more, borrow more, buy smaller, buy further out, or wait longer. Often all five.

Now, here is where some will push back. They will say first home buyers are still active. And yes, they are.

But look closer...

For owner-occupiers, first home buyer loan numbers are sitting at about 120,000 per year, with demand barely growing - up just 2% over the past year.

For investors acting as first-time buyers, demand is actually falling, down around 18% year-on-year, to about 6,750 transactions last year.

So yes, buyers are still in the market. But momentum is patchy at best.

And then look at the debt they are taking on

The average first home buyer loan is now pushing $600,000.

And it is rising again - up about 7% to 12% over the past year, depending on the owner resident or investor segment.

That tells you everything. First home buyers are not getting ahead. They are stretching further. Borrowing more. Taking on bigger risks. And often buying less for it.

So yes, the ABS says first home buyer loan commitments rose recently. Helped, no doubt, but the 5% deposit scheme.

But that does not mean the system is working. It means the system is forcing adaptation. And adaptation is not the same as affordability.

Supply is not rescuing them either

Australia completed about 190,000 dwellings last year.

That sounds big, until you remember we have spent years underdelivering, misallocating product, and producing too much of what is easiest to approve or finance rather than what aspiring buyers can actually afford.

We are still running very hard just to stand still.

And the generational slippage is real

When aged 25 to 39, about 45% of Millennials were homeowners, compared with about 60% of Generation X and closer to 68% of Baby Boomers at the same age.

So the idea that today’s younger households just need to try harder is, frankly, nonsense.

The ladder has not vanished. But it has been pulled up higher.

So no, the first home buyer is not dead in Australia.

But they are being asked to survive a market where the home costs too much, the deposit takes too long, the debt burden is too heavy, and the supply response is too weak.

About Michael Matusik Michael is director of independent property advisory Matusik Property Insights. He is independent, perceptive and to the point; has helped over 550 new residential developments come to fruition and writes his insightful Matusik Missive