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New data shows Aussies can now get into the property market earlier – but there’s a catch - featured image
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New data shows Aussies can now get into the property market earlier – but there’s a catch

key takeaways

Key takeaways

The time required for a couple aged 25-34 to save a 20% deposit for an entry-level property has decreased compared to last year. However, significant hurdles remain due to record-high property prices and the rising cost of living.

Mortgage serviceability is strained across capital cities, with entry-level home loan repayments now exceeding the recommended threshold of 30% of income. This is exacerbated by high cash rates, posing a risk of mortgage stress for first-home buyers.

The challenges of saving time and stretched mortgage serviceability, along with high property prices, have increased reliance on financial support from family. Aspiring homeowners may need to explore different property types or locations for improved affordability, with the concept of "rentvesting" gaining traction.

The report underscores the urgent need for governmental intervention to address the long-term housing undersupply issue. While schemes like Help to Buy show promise, sustained efforts are necessary for meaningful change.

The latest 2024 First-Home Buyer Report from Domain, in collaboration with digital lender Unloan, backed by Commbank, offers a deep dive into the evolving landscape for first-home buyers in Australia.

This comprehensive report paints a complex picture, primarily influenced by the current surge in interest rates.

Save Money For Home Cost

Quicker savings for a deposit - but it's not all rosy

The primary financial challenge for first-home buyers remains the hefty deposit.

Fortunately, the time required for a couple aged 25-34 to save a 20% deposit for an entry-level property has shortened compared to last year - we're looking at a reduction of 2 months for houses and 1 month for units.

Dr Nicola Powell, Domain's Chief of Research and Economics, cautions:

“Despite this positive shift, significant hurdles persist for first-home buyers, including record-high property prices and the escalating cost-of-living.

The slight decrease in savings time is more beneficial for those who can consistently save and have seen wage growth, as these are crucial contributing factors.”

Table 1. The time to save for a 20% deposit on an entry-priced home for a couple aged 25-34.

 

 

 

 

Area

Time to save
2024 Annual change in months 5-year change in months
Entry house Entry unit Entry house Entry unit Entry house Entry unit
Sydney 6y 8m 4y 6m -1 -1 6 -11
Melbourne 5y 5m 3y 8m -3 -1 -3 -8
Brisbane 5y 2m 3y 9m 4 4 12 4
Adelaide 5y 1m 3y 6m 5 4 15 8
Perth 3y 10m 2y 5m 4 2 4 0
Hobart 4y 10m * -6 - 12 -
Darwin 3y 7m 2y 3m -1 -3 0 0
Canberra 5y 9m 3y 7m -4 1 10 2
Combined capitals  

5y 1m

 

3y 7m

-3 -1 9 2
Combined regionals  

3y 9m

 

2y 11m

1 -2 8 2
Australia 4y 9m 3y 5m -2 -1 8 2
Includes only areas with at least 50 transactions. Hobart units are excluded due to low volumes. y = year, m = month.

Mortgage serviceability: a stretching concern

Another critical aspect affecting first-home buyers is mortgage serviceability.

This is calculated as the initial mortgage repayments on an entry-priced property for a buyer with a 20% deposit, expressed as a percentage of the average household income for a couple aged between 25 and 34.

To stay clear of "mortgage stress", it's advised to keep mortgage repayments under 30% of income.

Powell notes:

"Our data reveals that mortgage serviceability is strained across capital cities, with entry-level home loan repayments now exceeding the recommended threshold.

This puts a spotlight on the double-edged sword of high cash rates for first-home buyers.

Although saving for a deposit might be quicker for some, the escalated interest rates make servicing a mortgage tougher, increasing the risk of mortgage stress."

Figure 1. Mortgage repayments on an entry-priced home as a percentage of income for a couple aged 25-34.

Mortgage Repayments On An Entry Priced Home As A Percentage Of Income For A Couple Aged 25 34

Implications for first-home buyers

So, what does this mean for those looking to break into the market?

The challenges of saving time stretched mortgage serviceability, and sky-high property prices have led to an increased reliance on financial support from family, often referred to as the 'bank of mum and dad', for securing deposits.

For aspiring homeowners, it's worth exploring different property types or locations for improved affordability.

The concept of "rentvesting" has thus gained traction.

This situation highlights the urgent need for governmental intervention.

While schemes like Help to Buy show promise, addressing the long-term housing undersupply issue demands more robust and sustained efforts from our government.

About 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.
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