Time for first homebuyers to save deposit for a property blows out to 11 years

How long it takes first-time home buyers in Australia to save for a deposit for a goods boomed for more than a decade as prices drastically outpace wages.

A new report from ANZ and property data firm CoreLogic shows the median 20% deposit to buy property in Australia – which includes both units and houses – is now $147,795.

With a median weekly household income of $1,665, it would now take newcomers 11.4 years to save the 20% deposit required to avoid paying lenders’ mortgage insurance or IMT.

Every bar in the capital, Canberra, has plunged over the past month.
First-time homebuyers earning median wages are facing record wait times to save for a deposit. (PAA)

In Australia’s capital cities combined, that figure drops slightly to 11.2 years, while in the country’s combined regional centers it drops to 10.5 years.

Australian head of research at CoreLogic Eliza Owen said the record prices raised the “significant hurdle” of saving for a deposit.

“The national median home value is now estimated at 8.5 times the national median annual household income level,” Owen said.

“This is a record high and a 6.8x increase since the onset of COVID-19 two years ago.

“Furthermore, the increase in the home value to income ratio was the largest in all of regional Australia, where house prices rose far more than incomes.”

First-time buyers are forced to live drastically below their means for more than a decade to enter the market. (ANZ Bluenotes/CoreLogic)

The report found that the cost of renting in Australia is now almost equal to the cost of servicing a mortgage, more so in rental markets known for their lifestyle features.

In places like Bourke (NSW), the Grampians (Victoria), East Pilbara (Western Australia) and Far North Queensland, it is now cheaper to buy than to rent.

In March 2022, advertised rents in Australia were around 13% higher than before the pandemic.

Recent research from the financial comparison site Finder correlates the sharp rise in asking rents, found that nearly half of tenants surveyed say they are struggling to pay their rent in April 2022.

“This spike in rental costs is putting a lot of pressure on renters, and they have very little money left over for other necessities,” said Sarah Megginson, money editor at Finder.

“Once they pay the rent, life is very hard.

“Some tenants simply cannot afford the rapid increase in their rent in such a short time and there are even stories of families forced to live in their cars or in makeshift tents on the street.”

In “lifestyle” rental markets, it is now cheaper to manage a mortgage than to rent a property.

Megginson recommended people who are struggling to pay rent try to negotiate with their property manager and do an “emergency audit” of the household budget.

“If you can’t pay your rent and you have a lease now, contact your property manager and see if you can come to an agreement with your landlord,” she said.

“Those currently living in a house might consider upgrading to a townhouse or single unit, as rent increases for apartments have not been as significant.

“Cut all unnecessary expenses and do an emergency audit of all utilities to see where you can save money on things like energy bills and insurance.”

Australians at risk of homelessness can call the Homelessness Hotline on 1800 474 753 or the National Debt Helpline on 1800 007 007.

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