Australia’s housing market is witnessing an unusual phenomenen. While property prices have mellowed down in some areas, rental prices continue to rise, making it increasingly difficult for young Australians to save for their first home.

Recent figures from the Australian Bureau of Statistics (ABS) highlight this challenge. The number of owner-occupier loans issued to first-home buyers fell by 4.3% in the March 2026 quarter, while the total value of these loans declined by 6.7% to A$17.9 billion. The figures suggest that lower house prices alone are not enough to make home ownership more achievable.

Higher rents are forcing many households to succumb to little or no money to save for a deposit. Increased living costs also reduce borrowing capacity, making it harder for first-home buyers to qualify for mortgages even as property prices soften.

One of the main reasons rents continue to rise is the shortage of rental properties. Vacancy rates remain below one percent in many Australian cities, allowing landlords to increase rents as demand continues to bypass supply. At the same time, some investors are leaving the market or delaying new purchases, reducing the number of rental homes available and increasing competition among tenants.

The Australian Government has introduced measures aimed at improving housing affordability, including support for first-home buyers and initiatives to increase housing supply. However, reduced incentives for investors have also contributed to tighter rental markets in the short term.

This trend is particularly evident in Sydney and Melbourne, where rental demand remains strong despite softer property prices. Rising rents also place additional pressure on household budgets, contributing to inflation and making it more difficult for the Reserve Bank to reduce interest rates.

Australia’s housing challenge is no longer simply about high property prices. It is increasingly about ensuring there are enough homes, both to rent and to buy, and to meet demand. Until housing supply improves, falling house prices alone are unlikely to make home ownership significantly easier for first-home buyers.