Here’s how long it takes first home buyers to save a deposit – State by State

There’s no doubt more first home buyers are looking to get into the market at present.

And the softening property market is translating to improved affordability.

However first-home buyers in Sydney and Melbourne will need to save for up to six-and-a-half years for a deposit to purchase an entry-level house, according to the recently released Domain First Home Buyers Report. Buy Home In Australia

“Although the majority of capital cities saw the journey to homeownership become a little longer compared to the same time last year, in recent months weakening prices will eventually translate to improved affordability,”  said Domain Senior Research Analyst Dr. Nicola Powell says.

The report shows the amount of time required to save a 20 percent deposit for an entry-level house and unit for a couple aged between 25-to-34 years old on an average income in each capital city.

Buying conditions have improved, and first-home buyers appear to be taking advantage of low-interest rates, retreating investor activity, reduced foreign buyer interest, the extension of the federal government’s first home loan deposit scheme, and other state-based incentives.

Domain First-Home Buyer Report

Time take to save 20 percent entry-level house deposit, based on a couple aged 25-34 years old

City Entry-level house price Time to save Annual change Annual change, months 5-yr change 5-yr change, months Time to save 5% deposit
Sydney $680,000 6 years 6 months 2.6% 2 5.4% 4 1 year 7 months
Melbourne $600,000 6 years 2.9% 2 28.6% 16 1 year 6 months
Brisbane $450,000 4 years 6 months 1.9% 1 17.4% 8 1 year 1 month
Adelaide $375,000 3 years 11 months 0% 0 6.8% 3 11 months
Perth $366,580 3 years 5 months -2.4% -1 -12.8% -6 10 months
Hobart $380,000 4 years 2 months 6.4% 3 42.9% 15 1 year
Darwin $362,000 3 years 1 month -2.6% -1 -15.9% -7 9 months
Canberra $606,060 5 years 5 months 6.6% 4 22.6% 12 1 year 4 months
Source: Domain

 

Domain First-Home Buyer Report

Time take to save 20 per cent entry-level unit deposit, based on a couple aged 25-34 years old

City Entry-level unit price Time to save Annual change Annual change, months 5-yr change 5-yr change, months Time to save 5% deposit
Sydney $585,000 5 years 7 months 1.5% 1 -6.9% -5 1 year 4 months
Melbourne $424,500 4 years 3 months 2.0% 1 -1.9% -1 1 year
Brisbane $328,000 3 years 3 months -4.9% -2 -15.2% -7 9 months
Adelaide $285,000 3 years 0% 0 5.9% 2 9 months
Perth $257,000 2 years 5 months -3.3% -1 -17.1% -6 7 months
Hobart $320,000 3 years 6 months 2.4% 1 40% 12 10 months
Darwin $200,000 1 year 8 months -9.1% -2 -52.4% -22 5 months
Canberra $370,000 3 years 4 months 0% 0 -2.4% -1 10 months
Source: Domain

First-home buyer participation

First home buyers are becoming a more significant buyer group in most states and territories.

The following graph provided by Domain shows the percentage of first home buyer loans financed, based on the total value of owner-occupied loans.

First home buyers

Sydney first home buyers

Sydney remains the most expensive of all our capital cities and, as a result, the path to purchase is the longest.

Dr Powell says that would-be first-home buyers faced with the difficult financial hurdle of saving a lump sum deposit amid rising living costs, low wages growth, and weak saving rates, will find the journey to homeownership has edged further out of grasp.

A 25 to 34-year-old couple on average Sydney incomes will need to save for six and a half years for a 20 percent deposit on an entry-level house or five years and seven months for an entry-level unit.

Melbourne first home buyers

Melbourne is the third most expensive city to purchase an entry-level house but has the second-longest path to purchase, behind Sydney.

As growth in entry-level house prices outweighs weak savings rates and wages growth, this creates a challenging combination for first-time buyers to save a lump sum deposit.

Dr Powell explained that for a 25 to 34-year-old couple on average wages, the path to purchase is six years to save for an entry-level house deposit, two months longer than this time last year.

Prospective first-home buyers will be saving for four years and three months to achieve an entry-level unit deposit, adding one month compared to this time last year.

Brisbane first home buyers

Dr. Powell explained Brisbane provides mixed results for first-home buyers.

This year, the time to save an entry-level unit has declined but it is the opposite outcome for entry-level houses. Brisbane Suburb

It would take the average couple four-and-a-half years to save a house deposit, one month longer compared to last year.

Two months have been snipped from the unit savings time, now sitting at three years and three months.

It is seven months quicker to save an entry-unit deposit compared to five years ago, as softening prices and growing wages create the perfect storm for first-home buyers.

An unprecedented number of developments built over 2015-16 have been at the core of Brisbane’s unit price falls, pushing values lower for multiple years.

Of course, will this create a better affordability event that first home buyers who purchased Brisbane apartments would’ve seen no capital growth over the last 5 years.

While some of these new apartments may have created some lifestyle options, they have not been a good way to get onto the property ladder for first home buyers in Brisbane – after going to all that effort of saving a deposit, it’s nice to see the value of your home increase.

Adelaide first home buyers

In Adelaide, the time to save the recommended 20 percent deposit for an entry-level unit is three years and takes another 11 months for an entry-level house according to Domain.

This has remained exactly the same compared to last year, Adelaide being the only capital city to offer stable conditions for first-home buyers.

Average wage growth has outpaced the modest increase in entry-level prices over the past year.

This has also been offset by a fall in the savings rate, balancing out to keep the time to save steady.

Access to the first-home deposit scheme drops the path to purchase to 11 months for entry-houses and nine months for entry-units.

Perth first home buyers First Home Owners

According to Domain Perth is one of the more favourable capital cities for first-time buyers, having low entry prices and some of the shortest savings times.

Deposit saving journeys have declined for entry-level houses and units, with Perth one of only two capital cities to improve.

It would take two years and five months to save a deposit on an entry-level unit, and for an entry-level house add an additional year.

Purchasing can be propelled forward by the first-home loan deposit scheme; saving journeys become significantly shorter at 10 months for houses and seven months for units to achieve a 5 percent deposit.

Hobart first home buyers

First-home buyers in the Tasmanian capital have been competing against sluggish wages growth and accelerating prices in recent years.

While the pace of property price growth has moderated from double-digit gains, the journey to homeownership continues to lengthen.

The time taken to save a 20 percent deposit has increased to four years and two months for entry-houses and three-and-a-half years for units, up by three months and one month, respectively according to the Domain report.

Deposit saving times have been stretched by 15 months for houses and 12 months for units since 2015, further emphasising the affordability constraints.

Canberra first home buyers 34079710_l

In Canberra, affordability has become stretched with entry-level house price growth exceeding wage growth, while entry-level units remain balanced.

The time to save the recommended 20 percent deposit for an entry-house is five years and five months, taking four months longer compared to last year.

This is the biggest increase of all the capital cities according to the Domain Report.

Darwin First Home Buyers

First-home buyers in Darwin benefit from the lowest entry-prices and quickest deposit saving journey out of all the capital cities.

It would take three years and one month to save for the recommended 20 percent entry-level house deposit and one year and eight months for an entry-level unit.

This is one month quicker compared to last year for houses and two months quicker for units according to the Domain report.

Now is the time to take action and set yourself for the opportunities that will present themselves as the market moves on

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Kate Forbes

About

Kate Forbes is a National Director Property Strategy at Metropole. She has 15 years of investment experience in financial markets in two continents, is qualified in multiple disciplines and is also a chartered financial analyst (CFA).
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'Here’s how long it takes first home buyers to save a deposit – State by State' have 2 comments

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    September 25, 2020 Sarathy

    Do these time taken to save deposits for entry level houses and units apply to first home buyers living in their respective capital cities as the cost of living is different for different capital cities ?

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