(July 2025 Blog) Rising demand, affordability challenges, and what buyers need to know

Australia’s property market is moving through a phase defined by soaring demand, population shifts and widening affordability gaps. First home buyers face tough conditions, while price growth in both entry-level and prestige suburbs continues to climb.

The first home buyer struggle

First home buyers are facing increasing challenges in 2025, according to Finder’s latest First Home Buyer Report.

Here are four key takeaways from the report: 

1. Saving a deposit is taking longer than ever, with nearly 87% of buyers saying it's harder now than it was three years ago. 

As a result, most are entering the market with less than a 20% deposit, with around 70% falling into this category. A smaller deposit can attract higher interest rates and lenders' mortgage insurance, adding tens of thousands of dollars to the cost of buying.

2. The fear of missing out (FOMO) is driving quick decisions. With 38% buying due to price anxiety (up from 31% in 2022) and 61% having already missed out on a home they wanted, buyers are acting fast. In some cases, this has meant first home buyers have gone over budget – with 47% spending more than planned – and many are left with little to no emergency savings.

3. Buying solo is almost impossible. In 2017, single-income earners could afford a home in more than half of suburbs (57%). Today, that figure is just 16%. As affordability shrinks, more buyers are pooling resources with partners or family, or relocating to regional areas to make ownership achievable.

4. Government support schemes continue to play a crucial role for first home buyers navigating today’s tough market. More than three-quarters (78%) of first home buyers have either applied for or plan to apply for government assistance programs.

Population pressures ramp up demand

These challenges don’t exist in isolation. One key factor intensifying competition in the housing market is Australia’s rapidly growing population.

 According to the Australian Bureau of Statistics (ABS), in 2024, the country’s populationgrew by 1.7%, an increase of almost 446,000 people, driven primarily by net overseas migration. 

Victoria and Queensland each saw population growth of 1.9%, while Western Australia led the charge with a 2.4% rise.

This influx is putting further pressure on housing markets, particularly in the major capitals. With more people competing for limited homes, demand is rising faster than supply can keep up. 

For investors and existing homeowners, this has helped sustain high property values. But for first home buyers, it’s another factor driving competition and pushing entry prices further out of reach.

Melbourne market recovery underway

Population growth is one of the factors holding up Melbourne’s property market, which, after a period of softness, is regaining momentum.

Domain’s latest forecast predicts a 6% rise in median house prices by mid-2026, taking the city’s median house price to over $1.1 million. Other factors fueling this rebound include interest rate cuts, strong employment and intergenerational wealth transfers that are expanding the buyer pool. The return of investor interest, especially from interstate buyers cashing in on gains in Perth and Brisbane, is also playing a role in the recovery. 

While affordability remains an issue, especially for first-home buyers, Melbourne still appears relatively good value compared to Sydney, where the median house price is on track to hit $1.83 million.

Prestige pockets outperform

Within this trend of general price uplift, Melbourne’s $2 million-plus suburbs are also seeing a new chapter in property growth. 

Prestige middle suburbs, defined by leafy streets, proximity to top schools and a strong sense of community, are outperforming many inner-city neighbourhoods. 

According to Domain, over the five years to March 2025, suburbs like Balwyn North (26.4% growth to $2.25 million) and Surrey Hills (26.3% to $2.195 million) have seen significant increases in median house prices. 

While Melbourne's luxury sector has historically lagged behind other states like Perth and South-East Queensland, increased buyer confidence driven by anticipated interest rate cuts and intergenerational wealth transfers is set to propel further growth.

Using a buyer’s agent

The current housing market presents significant challenges for buyers across the board. Rising prices and strong population growth are intensifying competition. Whether you’re a first home buyer or looking to upgrade, working with a buyer’s agent can provide expert guidance, help you identify the best opportunities and negotiate effectively. 

As an expert buyer’s agency, A Game Property Advisory can help you secure a quality property at a great price. Get in touch with Jim by calling 0422 446 170 or emailing jim@agameadvisory.com.au.