Despite a $55,000 boost in borrowing capacity, Australian home buyers are getting less bang for their buck. Rodney McLoughlin explores how falling interest rates and government support schemes are fuelling a competitive market — without necessarily improving affordability.
đź’¸ Borrow More, Get Less
Three interest rate cuts in 2025 allowed the average household to borrow up to $55,000 more than last year. But the catch? Median dwelling prices have jumped $60,000 in the same period. As Rodney McLoughlin points out, buyers are effectively paying more for less — stretching their budgets for smaller homes and higher debt.
The Australian Government’s expanded 5% Deposit Scheme has helped bring more buyers into the market, particularly first-home buyers. But this increase in demand, combined with chronically low housing supply, has only driven prices further upwards.
🏠Sydney: A Case Study in Affordability Crisis
Sydney remains ground zero for housing affordability pressures. New data shows:
- House prices surged by $121,500 over the past year.
- Units increased by $52,500.
- The median house price is now $1.62 million.
- The gap between house and unit prices has hit a record 108%.
This widening gulf makes it increasingly difficult for unit owners to upgrade to houses — effectively “pulling apart the rungs” of the property ladder, especially in premium suburbs.
📉 Listings Down, Prices Up
The spring selling season ended with a sharp 5.4% drop in national property listings, and a steeper 8.6% fall in Sydney. A lack of supply continues to apply upward pressure on prices. With older listings still being snapped up and fewer new homes entering the market, competition remains fierce.
November figures show:
- Sydney house asking prices rose 1.4% to $2.13 million.
- Unit asking prices rose 0.9%, now 6.3% higher year-on-year.
🧠Sentiment Shifting
Earlier in the year, buyers were buoyed by hopes of more rate cuts. But with inflation climbing to 3.8% in October, the Reserve Bank may hit pause — or even reverse course. This uncertainty is causing many to reassess their budgets and expectations.
🏗️ Upgraders Stall, Investors Surge
While first-home buyers remain active — especially those leveraging low-deposit schemes — the number of upgraders has dropped. Many homeowners are choosing to renovate rather than re-enter the bidding war. Meanwhile, investors are re-emerging, encouraged by lower rates and fewer competing upgraders.
⚠️ Mortgage Stress & Rising Costs
NSW continues to be the country’s most unaffordable state. Median home repayments now consume over a third of average incomes, with Sydney buyers facing repayments exceeding $5,600 per month — even with a 20% deposit. Rising costs for insurance, groceries, and fuel are adding to household stress.
As Rodney McLoughlin highlights, navigating this market demands more than enthusiasm — it requires strategy, insight, and realistic budgeting.
Real Estate Newsletter
This article is a curated summary of various news stories from the past week, offering insights and updates on the real estate market. 5 December 2025.
Rodney McLoughlin is a trusted real estate professional with deep insights into the Australian property market. For personalized advice and market expertise, reach out to Rodney today.
