The Treasurer says the Budget will help build more homes and give first-home buyers a fairer chance.
That is the promise.
The Government is talking about more housing supply, more infrastructure, 5% deposits for first-home buyers, tax reform and a national target of 1.2 million well-located new homes over five years from 1 July 2024. In the 2026–27 Budget speech, the Treasurer said the Budget would lift total housing investment to a record $47 billion and help young Australians into their own homes through 5% deposits and tax reform.
On the surface, that sounds like a housing plan. But the real test is not what is announced in Canberra. The real test is what happens when a young couple sits across from a lender, opens Domain or realestate.com.au, and tries to work out what they can actually buy.
Australia is not dealing with a small housing problem. The total value of Australian residential dwellings reached $12.307 trillion in the December quarter of 2025. You cannot run a $12 trillion residential property market on slogans, short-term political fixes and the hope that interest rates will do all the work. More approvals may increase supply, but approvals do not automatically make homes affordable.
Meet Clara and Sam
Clara and Sam are a young couple in their 20s. They are both working professionals. They have been together for about a year and are now talking seriously about moving in together, getting married and buying their first home.
Together, they earn around $160,000 a year.
Clara’s parents live in Sydney’s Eastern Suburbs. Sam’s parents are also in a strong financial position. Both families want to help. Each side offers $100,000 as a gift, giving Clara and Sam a combined family contribution of $200,000.
On paper, they should be in a strong position. They have a good income, family help, stable employment and a genuine desire to enter the market. They are exactly the type of young couple the Budget says it wants to help.
But this is where the real story begins.
The Lender Does Not Assess a Budget Speech
Before Clara and Sam start seriously looking at properties, they speak to a mortgage broker or lender.
The lender wants to know everything: their income, employment history, credit cards, car loans, HECS or HELP debts, rent, savings pattern, spending habits, living costs and whether the $200,000 from their parents is a genuine gift or a repayable loan.
Then the lender applies the rules.
APRA has kept the 3 percentage point mortgage serviceability buffer, meaning borrowers are assessed at a rate above their actual mortgage rate. APRA has also activated a debt-to-income limit from February 2026, requiring banks to limit new mortgage lending at debt of six times income or more to 20% of new lending.
For Clara and Sam, six times their income is:
$160,000 x 6 = $960,000
That does not mean the bank will automatically lend them $960,000. Their real borrowing power depends on their expenses, debts, credit cards, HELP debt, job stability and lender policy. As a practical guide, a realistic borrowing range may sit around $650,000 to $850,000, with the higher end becoming increasingly sensitive to their lifestyle and future plans.
With their $200,000 family gift, their possible purchase range may look like this:
| Purchase price | Family gift / deposit | Approx. loan | Approx. monthly repayment at 6% over 30 years | What it means |
|---|---|---|---|---|
| $800,000 | $200,000 | $600,000 | $3,600 | Safer and more manageable |
| $900,000 | $200,000 | $700,000 | $4,200 | Possible, but tighter |
| $1,000,000 | $200,000 | $800,000 | $4,800 | High pressure |
| $1,100,000 | $200,000 | $900,000 | $5,400 | Very stretched |
These are simple principal-and-interest estimates. They do not include strata levies, council rates, water rates, insurance, repairs, special levies, moving costs or the cost of living.
That is where life becomes more important than the spreadsheet. What happens if Clara has a child in five years? What happens if one income drops for six or twelve months? What happens if Sam loses his job? What happens if AI, automation or restructuring affects one of their careers? What happens if interest rates rise again? What happens if they buy an older apartment and a special levy arrives?
The real question is not, “What is the maximum the bank will lend?” The real question is, what can Clara and Sam safely live with?
The Online Search: One Bedroom Gets Them In, Two Bedrooms Gives Them a Life
Once Clara and Sam understand their likely borrowing range, they do what almost every buyer now does. They go online, search Domain and realestate.com.au, filter by price, location, bedrooms, parking and property type, and quickly discover that a one-bedroom apartment and a two-bedroom apartment are completely different decisions.
A one-bedroom apartment may get them into a suburb. A two-bedroom apartment gives them more flexibility, stronger resale appeal and more time before they outgrow the property. If Clara and Sam are planning to marry and possibly have a child in the next five years, a one-bedroom may only be a stepping stone.
But the price jump is significant.
A new one-bedroom apartment may still be within reach in parts of Sydney. A new two-bedroom apartment, especially in a better-connected suburb, can quickly move toward the top of their comfort range or beyond it.
That is the part of the market the Budget language does not explain.
Clara and Sam may be able to buy, but the choice is rarely simple. They can buy smaller and accept that they may outgrow the apartment quickly. They can buy further away and compromise on lifestyle and family support. They can buy older and take on strata and building-condition risk. Or they can borrow more and hope their lives go exactly to plan.
Why the New Apartments Are So Expensive
This is the part of the housing debate that is often avoided.
The Government can announce more homes. The State can speed up approvals. Local councils can be pushed aside. Developers can lodge more applications. But the apartment still has to be built.
Let’s use a simple working example.
A new one-bedroom apartment of around 50 square metres internal area, using a conservative construction-cost assumption of $8,000 per square metre, already has an internal build cost of:
50 sqm x $8,000 = $400,000
But that is not the sale price. That is before land, basement parking, common areas, lifts, fire services, consultants, GST, finance, holding costs, contributions, marketing, selling costs, risk and developer margin.
By the time those costs are included, it is easy to see how a new one-bedroom apartment may need to sell around $600,000 or more.
Now look at a modest two-bedroom apartment of around 80 square metres internal area. At the same construction-cost assumption, the internal build cost is:
80 sqm x $8,000 = $640,000
Again, that is before land and every other project cost. By the time the finished product reaches the market, many new two-bedroom apartments in Sydney can easily need to sell close to $900,000 to $1 million, depending on location, land value, parking, design, building scale and feasibility.
This is the contradiction. The Government says it wants more homes. But if the new homes are too expensive for ordinary working buyers, who exactly are they being built for?
The Part We Should Have Seen Coming
As a real estate agent who has watched this market for decades, I do not see today’s housing crisis as a sudden problem. I see it as the collision of decades of failure across all three levels of government.
Federal governments controlled migration, tax policy, national housing programs and fiscal settings. State governments controlled planning reform, public housing, major infrastructure, transport and land-use policy. Local councils controlled zoning, height limits, local objections, development approvals and the practical reality of what could or could not be built.
For decades, we knew Australia’s population was growing. We knew Sydney was running out of well-located land. We knew that if we did not build up in the right locations, we would eventually run out of realistic options. We knew roads such as Old South Head Road, New South Head Road and Bondi Road were already under pressure. We knew local councils were making development too slow, too expensive and too uncertain. We knew renters were under pressure and public housing was under strain.
And yet, the system moved too slowly.
Now, after decades of delay, governments are rushing to approve more housing. But approving housing is not the same as delivering affordable housing. That is the difference.
The Real Question
The Budget may speak to young buyers, renters, families and people who want housing to be more affordable. But the numbers tell a harder story.
Clara and Sam are not low-income buyers. They are two working professionals earning around $160,000 a year, with $200,000 of family help. In previous generations, that combination would have placed them in a very strong position. Today, even with that support, they still have to make hard compromises.
They can buy smaller. They can buy further away. They can buy older. They can borrow more and accept greater risk. Or they can wait and hope that prices, interest rates and construction costs somehow move in their favour.
The same pressure is visible at the other end of the housing system, with NSW having 68,247 households waiting for social housing as at 31 March 2026. That does not drive Clara and Sam’s buying decision directly, but it shows the wider housing ladder is under pressure from top to bottom.
That is why the Budget housing story cannot be judged by announcements alone. It has to be judged by what happens when real people try to act on it.
Can Clara and Sam buy? Where can they buy? What level of debt do they need to take on? What happens if they have a child, one income drops, interest rates rise, or their employment changes?
If a couple earning $160,000, with $200,000 of family support, still struggles to comfortably buy the new homes being promised, then the policy may sound good — but the numbers do not yet add up.
