Increase in first-home buyer activity does not mean affordability is solved.

While first home buyers now comprise 18.1% of the market due to the decrease in investor activity, homeownership rates are still at their lowest level.

In fact, according to the figures from the Household Income and Labour Dynamics in Australia (HILDA) survey, there has been a rise in the number of renters, particularly amongst millennials.

For RiseWise Property Review CEO and Founder Don Peleg, this could mean that some potential buyers are still being priced out of the market, even after the price drops.

In a think piece for Property Update, Peleg argued that a lack of family-suitable housing is likely to continue to push prices up. While the Federal Government is in the process of establishing a strategy that could help relieve skyrocketing prices, Peleg said price hikes are still likely to happen

"This is high on the agenda for the Federal Government, however, a coordinated strategy should be put in place to encourage a better spread of the population across Australia as well as the construction of owner-occupier appropriate dwellings in the middle-ring suburbs in our major capital cities," Peleg said.

He added: "Without a strategic and comprehensive solution, it is likely that the current supply and demand patterns will once again lead to escalating prices, deteriorating housing affordability and a reduction in home ownership in Australia."

Peleg explained that initiatives should also be undertaken to address these issues on the state level. He cited Sydney, noting that even the city’s record levels of housing construction will not enough to meet the ballooning population growth.

"Other measures should be undertaken at the state level, particularly in relation to planning, greenfield land releases, rezoning and a more co-ordinated approach between the states and the local governments in relation to those matters," he said.

Moreover, he said incentives for meeting pre-approved development targets would encourage more local governments to boost the construction of new dwellings.

To be able to do this, Peleg said governments should be able to increase land supply release through coordinated strategies.

"Land releases in the outer suburbs are essential, particularly in Sydney to support the other supply-related measures that have been detailed above. The outer suburbs are significantly more affordable, and they provide an opportunity to first home buyers to enter the property market," he said.