By Leanne Spring May 6, 2024

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How to Save for a House Deposit in Australia

Property Investment
How to Save for a House Deposit in Australia

Saving for a home deposit is a significant milestone for many, but the path to securing it can be difficult and take several years to achieve.

Many people question how to save for a house deposit in the quickest and most efficient way, and thankfully I do have some tips and tricks to help.

Here’s a comprehensive guide for everything you need to know about saving for a home deposit in Australia.

How long does it take for first-home buyers to save for a deposit in Australia?

According to Domain’s First Home Buyers Report 2024, which is based on the average income for a couple aged between 25 and 34 years old in each capital city using ABS estimates of personal income, it takes the average buyer 4 years and 9 months to save enough deposit to buy an entry-priced house and 3 years and 5 months so save enough to buy an entry-priced unit.

Remember, an 'entry-priced' property sits in the 25th percentile, a crucial detail for first-home buyers.

However, this timeframe varies wildly depending on which state it is in.

The time to save for a 20% deposit on an entry-priced home for a couple aged 25-34

	Entry-priced house 2024	Entry-priced unit 2024	Entry-priced house 2023	Entry-priced unit 2023	Entry-priced houses (pre-pandemic - March 2020)	Entry-priced units (pre-pandemic - March 2020)
Sydney	6y 8m	4y 6m	6y 8m	4y 7m	6y 0m	5y 4m
Melbourne	5y 5m	3y 8m	5y 7m	3y 7m	5y 9m	4y 3m
Brisbane	5y 2m	3y 9m	4y 0m	3y 5m	4y 4m	3y 4m
Adelaide	5y 1m	3y 6m	4y 9m	3y 2m	3y 10m	2y 7m
Perth	3y 10m	2y 5m	3y 7m	2y 3m	3y 4m	2y 5m
Hobart	4y 10m	*	5y 8m	*	4y 3m	*
Darwin	3y 7m	2y 3m	3y 6m	2y 6m	3y 5m	1y 11m
Canberra	5y 9m	3y 7m	6y 0m	3y 7m	5y 0m	3y 5m
Combined capitals	5y 1m	3y 7m	5y 3m	3y 9m	4y 6m	3y 5m
Combined regionals	3y 9m	2y 11m	3y 10m	3y 1m	3y 3m	2y 10m
Australia	4y 9m	3y 5m	4y 11m	3y 7m	4y 2m	3y 3m

* Hobart excluded due to lack of data
Source: Domain First Home Buyers report 2024

Interestingly, as you can also see in the table above, the average time to save for a house deposit has decreased overall versus this time last year.

Nationally, those expecting to buy either a house or a unit have seen 2 months shaved off their expected time to save a deposit; however, times are still far higher than pre-pandemic.

This is because savers have benefitted from higher interest rates, consistent savings and wage growth.

But, the flip side is that these rates can make home loan repayments more challenging.

In the race of capital cities, Sydney still tops the chart, requiring nearly 7 years of savings for a house and 4.5 for a unit.

Next in line are Canberra, Melbourne, Brisbane and Adelaide, each averaging over 5-6 years for a house deposit.

While some areas have seen marginal improvements in saving time, let’s not overlook the soaring costs of entry-level homes in cities like Brisbane, Adelaide, and Perth, and Sydney.

Brisbane saw an astounding jump from $560,000 to $635,000 within the 12-month period, while Adelaide and Perth also witnessed significant increases.

In contrast, Melbourne, Darwin, and Canberra have seen more stability in entry-level property prices.

Entry prices, houses

	Dec 2023	Dec 2022	Y-0-Y	5-year Change
Canberra	$800,000	$800,000	0.0%	42.6%
Adelaide	$595,000	$517,000	15.1%	61.7%
Brisbane	$635,000	$560,000	13.4%	51.2%
Darwin	$460,750	$450,000	2.4%	15.2%
Hobart	$530,000	$550,000	-3.6%	55.3%
Melbourne	$678,000	$670,000	1.2%	16.9%
Perth	$505,000	$435,000	16.1%	31.6%
Sydney	$927,250	$870,000	6.6%	38.0%
Australia	$545,000	$492,000	10.8%	47.3%

Source: Domain First Home Buyer Report, Feb 2024.
Note: Entry price is based on 25th percentile for the 3 months to Dec 2023.

So now we know how long it takes to save for an entry-priced house and unit in each Australian city, let's look at how to do it, and how it's possible to speed that process up.

Steps to save for a house deposit.

As you can see above, saving for a house deposit can take years, especially while property prices continue to climb.

But if you can be disciplined with your spending, decide on a goal and research if there are any support options available, saving a deposit might be easier (and less expensive) than you think.

First things first, you’ll need to work out how much and how to save for a house deposit.

Here’s a good place to start.

Step one: Calculate how much you need to save.

The first step in looking at how to save for a house deposit is working out how much you need to save.

Warning: Don’t forget that the deposit isn’t the only thing you need to save for - you’ll also need to add up all fees and costs that come with the house purchase and include it in part of your calculation of how much to save.

The recommended deposit to buy any property is 20% of the property price, but in some cases, lenders might accept a deposit as low as 10% or even 5%.

Just be aware that buying with a smaller deposit means that you’ll need to borrow more over time, which also means paying more interest.

Buyers with a deposit lower than 20% are usually required to pay Lenders Mortgage Insurance (LMI), which can add thousands to your costs - the more your property costs and the smaller your deposit, the higher your premium.

Overall, it can equate to tens of thousands of dollars… and while it’s something many home buyers try to avoid, it’s often necessary evil to get your foot on the property ladder.

Here’s how much you can expect to need to save to buy a property in each state:

20% deposit on an entry-priced house in each state

	House price	20% deposit amount
Canberra	$800,000	$160,000
Adelaide	$595,000	$119,000
Brisbane	$635,000	$127,000
Darwin	$460,750	$92,150
Hobart	$530,000	$106,000
Melbourne	$678,000	$135,600
Perth	$505,000	$101,000
Sydney	$927,250	$185,400
Australia	$545,000	$109,000

Obviously the amount you need to save will vary depending on the location, but this is a good starting point to work from.

Once you’ve calculated how much deposit you’ll need, and LMI costs (if applicable), you’ll also need to calculate any other upfront costs.

Stamp duty (also known as transfer duty): All Australian states and territories charge stamp duty on a property transfer. Some buyers might be eligible for a stamp duty reduction, so it’s worth researching that here. For example, stamp duty on a $500,000 property in Victoria, for example, will cost you $21,970.
Fees for changes to the Land Titles register: This is another government fee payable to register the documents to transfer the property into your name. These typically equate to less than $1,500.
Conveyancing and legal costs: A conveyancer, or solicitor, is the person who oversees, and manages, the sale of a property from a seller to a buyer and manages the preparation of any legal documents needed for the transaction. Fees vary as there is no official charge and in addition to the service fee, you will usually also be charged for ‘disbursements’ including a title search, certificate fees, photocopying and paperwork registration costs. In total, the average cost of conveyancing can roughly be between $900-$2,200.
Building and pest inspections: A building inspection report and a pest inspection report will give you an accurate picture of the condition of the property and help you assess the likely costs of maintaining it moving forward.
Loan application fee: Most lenders charge a home loan application fee to cover the costs of legal contracts, property title checks and credit checks and also a fee for setting up the mortgage in their banking system.

Calculate all these costs to work out how much you need to save for your deposit and upfront expenses.

Failure to save for the additional upfront costs means they’ll be taken out of your deposit amount.

Step two: Assess your finances and track your spending.

You’ve calculated how much you need to save; now the next step is to work out your income and cash flow.

It’s a good idea to track your spending and get a detailed breakdown of your monthly outgoings, splitting it into essential costs and discretionary spending.

This can help you calculate how much you can afford to put towards your house deposit savings goal.

Step three: Pay off your debts.

At this point, you’ll need to pay off any debts, starting with the most urgent first.

Only once debts are cleared can you set up a savings plan and begin the savings process.

Step four: Set a budget.

In order to set a budget of how much to put aside each month, you need to work out what you can afford.

Using your spending breakdown, set a realistic budget and work out where you can make cuts to your current spending.

Step five: Save, save save.

At this point you need to get the savings ball rolling, make sure you stick to your budget and save consistently and efficiently.

Tips for saving for a home deposit faster

Now we know how to save for a house deposit, here are a few tips for saving for a house deposit even faster:

Tip one: Use a high-interest savings account.

Look for savings accounts that offer higher interest rates than traditional accounts.

While the difference in interest rates may seem small, over time, it can significantly boost your savings over a longer period.

Compare different banks and financial institutions to find the best rates and terms for your needs.

Some accounts may also offer bonus interest rates or introductory promotions, so keep an eye out for opportunities to maximise your savings potential even further.

Tip two: Sell unwanted items.

Selling off assets that you don't use - a second car, boat, bike or old phone may help make a dent in your savings.

Selling off old items on Facebook marketplace, eBay and online retailers are great for selling second-hand, pre-loved items that you are no longer using to make some extra cash.

Tip three: Up your income.

Consider asking for a payrise, or failing that, look for a side hobby to boost your income.

Any extra income you earn can go directly toward your home deposit savings.

Tip four: Cut back on expenses.

If you can’t increase your income, another option is to cut back on your outgoings.

Evaluate your major expenses, such as transportation and housing, and see if there are ways to reduce costs.

This could involve selling a car and using public transport, cutting back on your subscriptions and cancelling your gym membership.

Tip five: Move to a cheaper rental.

If possible, consider going a step further and downsizing to a cheaper rental or moving in with family or friends temporarily to save on rent.

Alternatively, explore options for refinancing existing debts to lower interest rates and monthly payments.

Tip six: Take advantage of government incentives.

Depending on where you live, there may be government schemes or incentives available to help first-time homebuyers, such as grants, tax credits, or special savings accounts with higher interest rates.

There are also some government incentives to help first-home buyers into the market without having to save the huge recommended 20% deposit.

1. LENDERS' MORTGAGE INSURANCE

As mentioned above, LMI is available for buyers who don’t have a 20% deposit.

The LMI premium is arranged by the lender, not the borrower, but is payable by the borrower and is calculated on a percentage of the purchase price - the smaller your deposit, the more costly your LMI.

2. HOME LOAN GUARANTEE SCHEME

The federal government’s home guarantee scheme allows eligible borrowers to take out a mortgage with a deposit as small as 5%, without paying lenders' mortgage insurance - the government will guarantee up to 15% of the loan.

Applications are limited to singles with an income of up to $125,000 or couples with $200,000.

Purchases under the scheme are limited to between $350,000 in some regions, to up to $950,000 in Sydney for new homes.

3. FIRST HOMEOWNER GRANT

The first homeowner grant scheme is payable to low–income first homeowners who apply and satisfy eligibility criteria.

For example, in NSW, applicants can receive $10,000 for a new home priced up to $600,000, or up to $750,000 if you’re building it yourself, and are exempt from paying stamp duty on homes up to various values.

In Victoria, applicants can also get a $10,000 grant for a new home valued up to $750,000, and $20,000 for those in regional Victoria, also with stamp duty exemptions.

In Queensland, the grant is $15,000 for a new home similarly valued up to $750,000. Again, there are stamp duty exemptions.

4. LOW DEPOSIT SCHEMES

Some developers are now looking at ways to make off-the-plan homes more affordable to first-home buyers with low deposit schemes.

For example, Domain reported that Third.i have launched a “co-posits” scheme with investment firm CoPosit for its Dairy Farmers Towers project in Newcastle, NSW.

The scheme means buyers can purchase a property with $10,000 in savings, with the remainder of the deposit paid over weekly installments until the apartment is ready.

If it proves popular, it’s likely more developers might introduce similar schemes to help first-home buyers purchase their properties.

5. FIRST HOME SUPER SAVER SCHEME

First home super saver scheme (FHSS), supports first-home buyers who meet the eligibility criteria to save money for a house deposit using their superannuation fund.

You can benefit from this by both the tax concessions on superannuation and on being able to take out up to $15,000 of your voluntary super contributions from any one year – and up to a recently increased all-time total of $50,000.

The catch is you need to apply to the federal government for permission before you buy your home.

It’s also worth remembering that using this scheme will diminish your future super savings.

The best way to save for a house deposit.

The best way to save for a house deposit depends on your individual financial situation, goals, and preferences.

There’s not one ‘best way’ to save for a house deposit, but there are several effective strategies.

Expert advice, an effective savings plan and ongoing dedication are the key to success here.

After all, if you’re able to stay disciplined and steadily build your deposit over time, even when life gets busy, you’ll find your property ownership dreams come true quicker than you’d expect.

A final word…

Saving for a house deposit can be a challenging and lengthy process.

Not only will you need to plan for the upfront deposit, but stamp duty and lenders mortgage insurance (LMI) are other significant costs to consider.

But a word of warning, while there are also many government incentives out there for first-time buyers to buy without the added pressure of saving a huge 20% deposit, there are plenty of risks involved.

Before going down the route of one of the many available government schemes on offer, make sure you speak to an expert such as the team members at Metropole to ensure your potential property purchase makes good investment sense.

About Leanne Spring Leanne is a highly experienced Buyers Agent in the Brisbane Real Estate market. Leanne became a passionate lover of property in 2001. Since then, both professionally and personally, she has been involved in all aspects of property including purchasing, negotiating, renovating, and selling.