The latest Property Insiders update reports that annual growth in national house-building costs eased to 2.7 per cent in May, well down from the extreme post-pandemic peak of 23.2 per cent. On the surface, that sounds like welcome news for first home buyers considering a house-and-land package or newly built home. The catch is that building costs are still about 64.6 per cent higher than they were at the start of 2018, so builders are working from a much more expensive base.
The bigger pressure point may now be land. The report highlights strong increases in vacant residential land prices across several capitals, including Adelaide, Perth and Brisbane, while Sydney remains the most expensive market for house-building blocks. That matters because government grants for first home buyers often favour new builds, but a grant does not automatically solve the affordability equation if the land component keeps climbing.
For first home buyers, this is a reminder to look beyond the headline build price. The real budget should include land, site works, council requirements, utility connections, settlement costs, loan fees, insurance, moving expenses and a cash buffer for variations. Even a modest design change or delay can stretch savings quickly when you are already borrowing at a high loan-to-value ratio.
Low deposit options can still help some buyers enter the market sooner, particularly where they reduce or remove lenders mortgage insurance. However, they do not reduce the loan itself. A smaller deposit usually means a larger mortgage, so it is important to model repayments against different interest rate and build-cost scenarios before signing a contract.
The practical takeaway is not that first home buyers should avoid new homes. It is that the decision needs sharper due diligence. Compare established homes, townhouses, units and new builds in the same area. Check whether a first home owner grant or stamp duty concession genuinely improves the numbers. Ask whether the location offers transport, work access and resale appeal, not just a cheaper block on the fringe.
If you are unsure how a construction loan, low deposit pathway or government scheme would fit your situation, speaking with a mortgage broker can help you compare lenders and avoid overcommitting. In a market where building cost inflation is slowing but land remains expensive, careful borrowing decisions may be just as important as finding the right property.
Please Note: If this information affects you or is relevant to your circumstances, seek advice from a licensed professional.
