Will government money and lower interest rates unlock more supply for first home buyers?

Private credit has a major role to play in Australia’s housing supply crisis

Australia’s housing supply and affordability crisis is being felt most acutely by first home buyers struggling to enter the market — a challenge governments across the country are trying to solve.

Will they succeed? It’s a difficult ask, but clearly something must be done to ensure younger generations have access to secure housing and the financial stability that home ownership provides. Alongside government measures, private real estate credit has a significant role to play.

A market under pressure

The median house price now exceeds $1 million in six Australian cities — Sydney, Melbourne, Brisbane, Gold Coast, Adelaide and Canberra — after a 5% annual increase across capital cities in the year to June 30¹.

• Sydney leads with a $1.7 million median,
• Perth sits just below the threshold at $955,000,
• Only Hobart ($726,000) and Darwin ($578,000) remain relatively affordable.

The central issue is lack of supply. Demand remains strong, supported by three interest rate cuts this year and the expectation of more, but new listings and dwelling completions continue to lag. Dan White, Managing Director of Ray White Group, told the Australian Financial Review that listing volumes are down about 20% year-on-year, intensifying the imbalance².

Policy response

In response, federal, state and territory governments are pursuing policies to:

• Accelerate rezoning and approvals under the National Housing Accord target of 1.2 million new homes by 2029, though the Property Council warns targets are unlikely to be met at the current pace³.
• Commit billions in incentives for first home buyers, including shared equity schemes, stamp duty discounts, access to superannuation, and grants typically around $10,000⁴ — most often targeting new or off-the-plan dwellings.

These initiatives are positive. Government purchase incentives and first home buyer support will ultimately boost supply and assist more Australians into ownership. But history shows that success depends on consistent, long-term policy settings. When stimulus and planning reform combine with falling interest rates, development activity typically lifts, improving affordability.

Benefits for developers

For developers, such conditions improve project economics, making previously marginal projects viable and unlocking more housing delivery. Proposed zoning changes also suggest outlying, affordable markets — once dominated by house-and-land packages — will see greater diversity, with townhouses and mid-rise apartments becoming more common, providing first home buyers with more accessible entry points.

Centuria Bass’ strategic role

At Centuria Bass Credit, we have maintained a strategic focus on financing developments in affordable markets — particularly the outer suburbs of Sydney, Melbourne and Brisbane. This segment of the market remains deep, resilient, and increasingly relevant.

For example, in southwest Sydney, where CBC is backing multiple projects, median house prices rose 10% in FY24 according to Domain¹ — a strong market to lend against and a demonstration of the demand underpinning affordable housing finance.

We are seeing an increased pipeline of opportunities in this space, with private credit playing a pivotal role in bridging funding gaps and supporting delivery. As governments, regulators, and developers move to meet ambitious housing targets, private credit will remain an essential part of the solution, ensuring more Australians can access the homes they need.

1.Domain House Price Report, June Quarter 2025
2.AFR – Sydney home gets $200k above reserve as Melbourne auctions rocket
3.Property Council of Australia – Home building pipeline still falling behind target
4. realestate.com.au – Budget bonuses: inside the states’ 2025 plans to boost housing