Both Things Are True

The affordability numbers are real. Sydney is the second least affordable major city in the world, with a typical home costing 13.8 to 14.0 times median household income. Australia is the only country with four capital cities on the list of least affordable major housing markets.

Prices have also risen strongly over the long run. National prices are down 2.7% from their March 2026 peak according to the realestate.com.au Home Price Index, though that follows several years of strong growth, and many markets remain well above where they were.

Those two facts seem to contradict each other. They stop doing so once you look at who is actually buying.

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The Price Is Set by the Marginal Buyer, Not the Average One

A median house price describes the middle of all sales. It does not describe the buyer who sets the price. In a market with limited supply, the price is set at the margin, by the buyers who are willing and able to pay the most for the homes available.

Most households cannot compete at that level. A household saving a deposit while rent rises may be priced out of a house at just over $1.6 million, the median in Sydney. That does not push prices down, because they were never the buyers setting the price.

As long as enough buyers can afford the homes on offer, and demand at the margin exceeds supply, prices hold or rise. The relevant question is not whether the average buyer can afford the average home. It is whether enough buyers can afford the homes that are available.

A large share of the country feeling priced out and a market that still clears are not contradictory. They describe different groups of buyers.

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Equity Changes Who the Marginal Buyer Is

Increasingly, the marginal buyer is someone who already owns property.

An owner who bought a well-located property several years ago may now hold significant equity. That equity can fund a deposit on a second or third purchase without saving from scratch, which is the mechanism covered in our blog to using equity to buy an investment property.

Compare two households on the same income. One bought a quality property in 2020 and held it through the growth that followed. The other waited. The first now has equity to deploy. The second faces higher prices with nothing behind them and may struggle to afford a single property.

This is why the gap widens. Asset owners compete for property with the benefit of capital growth. Non-owners compete with savings from income. Some economists describe the result as a K-shaped pattern, where people who own assets move up and people who do not fall behind.

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Why the Gap Seems to Appear Suddenly

Gaps built on compounding look small for a long time and then look very large. 

Property prices and incomes work the same way. A modest difference between price growth and income growth in the early years turns into a large one after a decade. It can feel as though affordability collapsed overnight when it deteriorated gradually. It also explains why the cost of waiting compounds, check out our blog comparing renting versus buying in monthly terms.

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Family Wealth Is Widening the Gap

Another factor is the role of family. More parents who own property are helping their children into the market, whether through gifts, guarantor arrangements, or letting them live at home longer to save.

That support keeps demand strong. It also means buyers whose families can help compete against buyers who cannot, which widens the gap between households with property in the family and households without it. It is not a choice anyone makes in the market, and it is not something a first home buyer can control.

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What This Does Not Mean

None of this means prices only rise. The cash rate is now 4.6%, lenders assess borrowers at a rate 3 percentage points higher, and tax changes have reduced investor demand. Together these have pushed prices down in several cities.

It also does not mean everyone should buy property, or that buying is the right move for every household. Affordability limits what the marginal buyer can pay, and a market cannot stay expensive indefinitely without buyers who can afford it. The point is narrower. Unaffordability for most households does not automatically mean prices will fall, because the market is set by the buyers who can afford them.

Supply matters too. Australia is building fewer homes than it needs. When demand from buyers who can pay exceeds supply, prices stay firm.

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What It Means If You Do Not Own Property Yet

The useful question is not whether the system is fair. It is what your realistic options are.

1. Understand your actual position. What you can borrow, which markets fit your budget, and how lenders assess you often differs from what you assume.
2. Consider where you buy, not only whether you buy. Prices in the city you want to live in may be out of reach while markets elsewhere are not. Rentvesting, which means renting where you want to live while investing where the numbers work, is one way households approach this.
3. Think about the long run. The households that have built wealth through property generally got into the market and stayed in it. That takes time, sacrifice, and trade-offs.

Those trade-offs are personal. Some people decide to put every spare dollar toward a deposit. Others choose to spend on a good life now, and that is a reasonable decision too. Both approaches involve giving something up, and neither is wrong.

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Ready to Find Out Where You Realistically Stand?

At Search Property, we help Australians cut through the noise and build data-driven investment strategies aligned with long-term wealth goals. Our buyers agents have helped thousands of clients build wealth through property because we focus on fundamentals, not headlines.

Book a FREE investment assessment call with Search Property. We’ll look at your position, your borrowing capacity, and the strategy that fits your goals.

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