Everywhere right now in Australia, property prices are rising, questioning the current affordability rate, especially for first-home buyers. That’s because, since first-home buyers hold little or no experience in the housing market, it is even more difficult for them to beat the situation. This is where the concept of the first-homebuyer affordability index becomes critical.

It’s the indices that tell how much the average income of a person should be to repay his/her first home loan. By comparing property prices with average incomes across cities, it helps them understand where they can, including how to

• Practically enter the market
• Make informed financial choices
• Plan for location, budget, and loan structure wisely

What the First Home Buyer Affordability Index Really Means

Simply put, the first-home buyer affordability index is the one that is measured as per ABS statistics. It tells how many homes a typical household income can afford, given median property prices and repayment burdens across each city.

And for first-home buyers, it tells how much income one needs to manage repayments, deposit amounts, and upfront costs like LMI and stamp duty. But it can be both state-wise and city-wise, so it’s essential to understand it early.

Meanwhile, right now, if we look at data, it says that one needs more than half of their household income to repay a loan in many cities.  For example, if the dwelling value to income ratio in Sydney sits around 9.7 times median household income, it is a clear signal of tight affordability.

In contrast, one can get better affordability in cities with smaller multiples. As a result, one can easily know where he/she can find the best value in terms of affordability and financial position.

The Current National Affordability Landscape

Right now, if we look at Australia’s housing affordability, it is under serious strain, backed by real data. In fact, CoreLogic data says that nationally, the dwelling value-to-income ratio hit 8.0 by December 2024, which is tied for the worst level on record.  And in August 2025 itself, the national home-value index rose 0.7% over the rolling quarter.

That means a typical household would need to commit eight times their annual income to buy a median-priced home. Even for well-earning first-home buyers, this is a significant increase.  To be more precise, when you look at mortgage serviceability (the share of income needed to repay a new loan), things look even tougher.

Like, more than 52.8% of the median household income is now required for mortgage repayments on a median-value dwelling. And saving up for a deposit is another panic. Because, assuming you can save 15% of your income, it now takes 10.6 years to build up a 20% deposit.

But there are some schemes under which you can apply, like the first home loan deposit scheme , first home buyer grant, and first home super saver scheme. Meanwhile, if we talk about rents, that too is squeezing the budget of first-home buyers.

Due to this, many first-home buyers are switching to rentvesting and co-buying investment strategies. In brief, we can say that since property prices and rents are rising everywhere, they are significantly outpacing the growth. And households now spend around 24.4% of their income on rent nationally in 2025.

City-by-City Affordability Snapshot

Now overall we know that affordability is reducing day by day, but does that mean we cannot find value in any city? Let’s find out from this city-by-city affordability comparison table below.

So, based on the above data, we can say that affordability suddenly looks very uneven, almost like each city is playing its own property game. For example, Sydney sits at the top of the price ladder with a $1.5M median and a 10.9x value-to-income ratio.

As a result, it is making the toughest buying environment for first-home buyers.  And with 55% of income going into mortgage repayments, buyers now need to stretch their budget more than anywhere else in the country.  Likewise, other cities like Brisbane, Perth, Adelaide, Hobart and Darwin are playing differently in terms of affordability.

But still, in these hot conditions, some cities are still affordable. Like, you can think of Adelaide, which is comparatively cheaper than the east coast leaders. Meanwhile, Hobart has cooled but still carries a $735k median and 8.1x ratio, keeping pressure on buyers even as competition has softened.

And then there’s Darwin — the quiet achiever. With the lowest median at $672k, the most manageable 6.1x income ratio, and repayments at only 42%.  Due to this,  it’s the only capital where affordability still resembles pre-boom Australia.

Where First Home Buyers Get the Most Value in 2025

With decreasing first-homebuyer affordability, now everyone wants to know where they can get the most value in 2025. So, based on the affordability data, three cities stand out for offering the best value mix-

• Darwin – The Most Accessible Market in 2025

Darwin remains the strongest value pick for first-home buyers. Why? That’s because a $672k median, 6.1x value-to-income ratio, and 42% repayment load is basically the closest thing Australia has to sustainable affordability in 2025. It also ranks best on rental affordability (26%), giving renters an easier path to saving a deposit.

• Perth – The Best Value in High-Growth Conditions

Perth is the rare market where growth and affordability are still moving together. With a $924k median and a 7.4x ratio, first-home buyers can still get a price point that’s manageable. And that too, backed by one of the strongest 2023–2025 capital growth runs. Even with stricter borrowing assessments in 2025, Perth’s repayment share (48%) makes entering the market more achievable than the east coast.

• Adelaide – The Middle Ground With Stable Value

Then, there is Adelaide, which sits in the middle but remains more accessible than Brisbane, Melbourne, and Sydney.  That’s because with a $926k median, 9.1x ratio, and 51% repayment share, it’s not “cheap”, but it still offers the balance many FHBs look for

• steady price growth
• lower competition than Brisbane
• more predictable long-term affordability

So, if you’re entering the market in 2025, affordability isn’t just about buying where prices are low, it’s about buying where:

• income keeps pace with repayments
• rent doesn’t wipe out savings
• the market isn’t running ahead of your borrowing capacity

And that’s why Darwin, Perth, and Adelaide become the three cities where first-home buyers get the most value in 2025.

What Drives Affordability Differences Across Cities

When it comes to affordability, it is crystal clear that it is not just about price tags. Several factors together are actually making some cities more accessible than others for first-home buyers, like

• Income Levels vs. Dwelling Prices

Cities with higher median household incomes often mask high property prices. For example, Sydney and Melbourne have large incomes, but dwelling values have grown faster, creating extreme value-to-income ratios above 9x. On the other hand, Darwin and Perth maintain more balanced ratios because incomes and prices grow in tandem.

• Local Supply and Demand

Affordability often breaks down where supply struggles to meet demand. Cities like Brisbane and Melbourne see strong population growth and low new housing stock. As a result, it pushed median dwelling values up faster than incomes. Comparatively, since Perth and Adelaide have higher supply relative to demand, they show better affordability.

• Rental Market Pressures

High rents make saving a deposit harder and affect borrowing capacity. Like in Sydney, the median rent consumes 31% of household income, so people are left with less room to save, while Darwin has a 26% rent ratio, which makes saving realistic.  And this rental affordability is what directly influences how first-home buyers plan their entry into the housing market.

• Government Incentives and Schemes

State and federal schemes, including the First Home Loan Deposit Scheme and First Home Owner Grant, can also impact affordability scales. Like cities offering targeted incentives or stamp duty concessions often improve practical entry, especially for buyers with average incomes.  On the other hand, if the eligibility criteria are too tight, it makes affordability beyond reach.

• Interest Rates and Borrowing Rules

Although rates are consistent nationally and at present steady after the RBA’s cash rate hold decision, lender policies differ. And still, stricter serviceability rules make high-priced markets even harder, as borrowers must prove repayment capacity on median-priced dwellings. As a result, it is disproportionately affecting cities like Sydney, Melbourne, and Brisbane on a major level.

That means affordability isn’t uniform. It’s the mix of income, property prices, rent, supply, and government grants and schemes that tells where first-home buyers can realistically enter the market in 2025. And cities like Darwin, Perth, and Adelaide consistently balance these factors, while Sydney and Melbourne remain the most challenging, as of now.

How Much First-Home Buyers Can Borrow in Each City in 2025

When you decide to borrow, your borrowing capacity will always be the real decider for you. That’s because today’s rising prices mean there is very little chance of banks giving final approval of loans. And with serviceability buffers still tight, borrowing power has shifted differently across each capital city.

For example, in Sydney if you buy, you may face the most restricted borrowing capacity because the median home sits at $1.5M. Meanwhile, in Melbourne, it is slightly better but still you need $155k income to service a loan on the $974k median. On the other hand, in other cities, like in Brisbane, you need an income closer to $160k for a median-priced home.

But, in Perth, borrowing power is still supportive. With a $924k median home price, you need earnings around $135k to borrow comfortably. Even with strong price growth, the 48% repayment ratio keeps lending more accessible than in east-coast markets.  And in Adelaide, if you borrow, you need an  income around $145k to qualify for a loan on the $926k median.

While in Hobart, you need earnings around $120k, but lenders can still consider Tasmania’s slower wage growth when calculating your loan limits. But in Darwin, you only need earnings around $110k to reasonably qualify for a median-priced home. This is because of the low 6.1x value-to-income ratio and repayments at only 42%.

Practical Ways First-Home Buyers Can Improve Affordability

Even though affordability looks tight this time in almost every city, first-home buyers still have practical ways to improve their position. The key is to combine government support, smarter location choices, and flexible buying strategies.  And here’s how you as a first-home buyer can make numbers work for you today:

Use Grants and Schemes That Reduce Upfront Costs

Government schemes continue to be one of the strongest supporters when it comes to affordability. Like, you can use the below grants and schemes to reduce upfront costs and better manage deposits.

• First Home Guarantee (FHG) – Under which you can buy with just a 5% deposit without LMI and reduce upfront costs by tens of thousands.
• First Home Owner Grant (FHOG) – This is especially helpful in states with new-build bonuses.
• First Home Super Saver Scheme (FHSS) – Where you can save through your super at a lower tax rate, thereby speeding up deposit timelines.

These programs don’t just solve the high-price problem but also help reduce the initial financial barrier that stops most buyers from getting started.

1. Smarter Location Choices

Many first-home buyers shift from “dream suburb” to “smart ”suburb”, places with:

• lower value-to-income ratios
• strong transport access
• growing rental demand
• future infrastructure commitments

And this is why cities like Perth, Adelaide, and Darwin continue to outperform on value. Even within Sydney or Melbourne, affordable pockets still exist around emerging growth corridors and outer-metro hubs. And here the goal is simple, choose locations where your income can keep pace with your home loan repayments.

2. Rentvesting to Build Wealth While Renting

Thirdly, you can choose rentvesting, which is again a strategy flourishing in the market right now. In fact, in 2024, over 8,000+ people have already used it. That’s because it is no longer a backup plan, it’s becoming the main strategy for buyers priced out of their preferred suburbs.  And in this you can easily rent where you want to live and buy where numbers work better.

This can help you—

• enter the market sooner
• avoid long deposit-saving timelines
• use rental income to support your loan

3. Guarantor Home Loans

You can also take support from a guarantor, who can be anyone from your family, your parents or your spouse under guarantor home loans. By this, you can easily

• avoid LMI
• boost borrowing capacity
• lower the deposit need to almost zero

But this option isn’t for everyone, it’s for the selective only, but it can dramatically reduce the financial load and cut years off waiting time. Because in this, your lender will get the surety that you will repay the loan, or at least the part which is guaranteed will be repaid.

Apart from all these practical ways, you can also work on your finances. That’s because even small financial adjustments can make a big difference under today’s complex  lending rules. Things like reducing personal debt, improving savings patterns, and streamlining expenses can actually improve serviceability.

Conclusion

If you look at everything together, like prices, incomes, rents, borrowing rules, and city-by-city differences, you’ll find that the 2025 market isn’t “easy”. But it’s also far from impossible. Buyers who understand where affordability still survives and who use the right strategies early are still entering the market without worries.

And cities like Darwin, Perth, and Adelaide are also proving that value still exists when price growth, incomes, and repayments stay in balance. Meanwhile, the tougher east-coast cities are showing why borrowing capacity and rental pressure matter more than ever. And this is exactly where effective planning is needed to give first-home buyers the edge to deal with this complex environment.

Using schemes that cut upfront costs, choosing suburbs where numbers work, and adopting flexible strategies like rentvesting or guarantor support. So, we can just say that in 2025, buying your first home isn’t just about chasing the cheapest city. It’s about choosing a path where your income, repayments, and long-term stability line up.   And when those three move together, affordability can become realistic again, even in a market that’s running fast.

For more discussion on how you can secure your first home this time, reach out to us at 1300 GET LOAN, or 0456 456 267 or visit Nfinity Financials.

FAQs

You might want to know more about the first home buyer affordability index. So, here are some more answers to commonly asked questions:

Q1. Do Australians need a $130,000 salary to afford the average rent?

Yes. Renters now need around $130k a year to comfortably afford the average unit, with many still spending over 30% of their income on rent.

Q2. Who is eligible for the first home buyers scheme in Australia?

You must be 18+, an Australian citizen or permanent resident, and not have owned a home before 1 July 2000.

Q3. What is the 30-40 rule for housing affordability?

If rent takes over 30% of income, you’re in rental stress. But if it goes over 40%, it’s classed as overburdened, especially for lower-income households.

Q4. Can I buy a house with a 10% deposit in Australia?

Yes, you can buy with 10%, but anything under 20% usually means paying LMI. So, aim for 20% if you want to avoid that extra cost or apply under low-deposit government schemes.