The journey to homeownership in Victoria, once a predictable path, has become an “impossible” dream for an entire generation of first home buyers1. The stark reality is that for most Victorians, purchasing a first home is now financially unattainable without significant family assistance or extraordinary circumstances2. This crisis is more than just a market blip; it’s a profound shift that challenges the traditional route to financial stability and threatens the social fabric of Victorian communities3. As AMP chief economist Dr. Shane Oliver states, “It’s awful, and we complain about it, but it only gets worse”4.
The numbers paint a clear picture of unprecedented unaffordability5. According to a Domain report, Melbourne’s median house price has reached a staggering $1,063,719, marking a 2.3% quarterly increase and its highest median in three years . The unit market, often seen as a more affordable entry point, offers little relief, with the median unit price climbing to a record-breaking $573,600 . The price-to-income ratio in Victoria is a record-breaking 13.9 times the average annual wage, a dramatic increase from 4.5 times in 1975 and 6.5 times in 2000 .
This crisis is driven by a fundamental decoupling of housing costs and earning capacity9. While post-COVID wage growth has been the strongest in recent memory, increasing by 4-5%, it pales in comparison to the acceleration of property values10. PRD chief economist Dr. Diaswati Mardiasmo warns that without building more homes or changing preferences, the price-to-income ratio could climb as high as 18 . To put this in perspective, a household would need an annual income of roughly $177,000 to qualify for a mortgage on a median-priced home, assuming they have a 20% deposit of over $200,000 available . The Australian Bureau of Statistics indicates that this income requirement is beyond the reach of about 70% of Victorian households13.
The deposit barrier alone is an almost insurmountable obstacle for many first home buyers14. Saving for a 20% deposit on a median-priced Melbourne home would take the average Victorian household over a decade, assuming they could save 20% of their gross income exclusively for this purpose15. This has made the “bank of mum and dad” a defining feature of the first home buyer experience, creating a two-tiered market where family wealth, rather than individual merit, often determines access to homeownership16.
Adding to the pressure is a severe housing shortage. Australia is facing an estimated deficit of 200,000 to 300,000 homes17. In Victoria, this shortage is made worse by construction cost increases, planning delays, and labor shortages that have persisted since the pandemic18. The Victorian Government has set an ambitious goal to build 800,000 homes over the next decade19. However, experts question if the construction industry has the capacity to deliver at this scale .
Faced with these challenges, first home buyers are being forced to redefine their expectations21. Many are choosing to buy a unit instead of a house or moving further away from the city to find something they can afford22. This “drive until you qualify” phenomenon pushes buyers to accept longer commutes and reduced access to services, which are hidden costs of the affordability crisis23.
The Victorian Government has introduced several schemes to help, including the First Home Owner Grant, stamp duty concessions, and the Victorian Homebuyer Fund (VHF) . The VHF, a shared equity scheme, allows the government to contribute up to 25% of a property’s purchase price, reducing the required deposit to as little as 5%25. While these measures provide some relief, they come with complex legal and financial obligations that require careful navigation .
Unfortunately, the future outlook is bleak. According to Dr. Shane Oliver, the situation “will continue getting more difficult for people over time to keep up with the rise in house prices” . The Demographia International Housing Affordability report ranks Melbourne’s housing as “impossibly unaffordable,” placing it among the least affordable cities in the world . Without significant, large-scale changes, first home buyers may have to accept the grim reality that homeownership is no longer a given.