From down payment to dealbreaker: Average house deposit now exceeds $100k

Aspiring homeowners now need a six-figure deposit to purchase a property, according to staggering new research. 

According to Finder’s First Home Buyers Report 2021, which surveyed 1,028 first home buyers, 11% now require more than a decade to scrape a deposit together.

This comes as ABS data from January 2021 shows that the average deposit needed to secure a mortgage is now a whopping $106,743 – an increase of 16% (+$14,851) since January 2019.

The ACT has seen the largest house deposit increase since 2019, with the upfront amount required swelling by 24% to $117,790, followed by New South Wales (23%, $128,469).

The report also found that the average first home buyer puts down 20% of the purchase price as a deposit.

Sarah Megginson, home loans expert at Finder said that saving for a house deposit is a big financial hurdle for first home buyers.

“Prospective buyers are being stumped by a supercharged property market, which isn’t showing any signs of slowing down just yet.

“Low interest rates have made it cheaper to pay down a mortgage, but this has pushed up property prices, making it even harder to save for a deposit,” Megginson said.

Finder’s research also revealed that over a third of respondents (38%) took between 2 and 5 years to save for their deposit, while 25% said it took them between 5 and 10 years.

Megginson said that government grants can help eligible buyers fast-track their dream of homeownership.

“As part of the First Home Loan Deposit Scheme, eligible buyers can seek out a mortgage with a 5% deposit.

“This means that for a property worth $600,000, you’d only need to save $30,000 which is far more achievable than a six-figure sum, and can help younger buyers get into the market early.

“While this does increase the cost of the mortgage over its lifetime through interest, the gains you stand to make as the property increases in value over time could potentially outweigh the extra interest costs.

“It’s important first home buyers weigh up all of these pros and cons when considering a real estate purchase,” Megginson said.

Source: Finder, ABS loans data                                                                                                   
* Analysis assumes a 20% deposit.

How to crack the property market if you can’t hit your savings goal:

1.  Consider rentvesting.
   This is where you buy where you can afford, and rent where you want to live.
2.  Find a guarantor. A guarantor provides additional security on a mortgage if you don’t meet the full deposit requirements as a buyer.
   While this can help get your application over the line, guarantors are also liable if you default on your repayments.
   This makes it a huge responsibility, which is why most guarantors are parents or close relatives.

Some extra first homeowner tips

• Get your finance pre-approved – in today’s fast-moving markets it’s important to make firm property offers with as few conditions as possible. Therefore having a finance pre-approved will make you put you in a much better position
• Don’t forget all the expenses homeowners have to pay that you didn’t pay as a tenant

• • Don’t underestimate the full cost of buying a home including stamp duty and conveyancing costs – these could amount to an additional 5%
  • Don’t forget the ongoing costs including insurance, rates, owners corporation fees, repairs, and maintenance
• Be prepared to compromise – your first home won’t be yours forever home. Don’t expect to live in the same type of property that took your parents 30-40 years to afford. This may mean you need to live in an apartment rather than a house or a suburb adjoining your preferred suburb.
• However, don’t let FOMO (fear of missing out) allow you to make the typical mistakes I’m seeing first homebuyers make of compromising on the wrong things.

• • Some are compromising on their finances and overstretching their budgets which may lead to financial challenges later down the track. They haven’t left money aside for all the little expenses they’re forgotten
  • Others are cutting corners and not conducting building and pest inspections.
  • Yet others are compromising on the standard of property or location just to get into the market

About Brett Warren Brett Warren is National Director of Metropole Properties and uses his two decades of property investment experience to advise clients how to grow, protect and pass on their wealth through strategic property advice.