Saving up for a home deposit? Here’s how long it could take

27 views 2022-03-30 14:15:56

The time it takes for a couple to save a 20 per cent deposit to buy an entry-level house has blown out by an extra 11 months during 2021 – nearly three times longer than the additional time recorded in the previous year – but the slowing market could offer a reprieve for first-home buyers in the year ahead.

Aspiring homeowners could now need as long as five years and eight months to save up for a deposit across the combined capitals as prices have surged to record highs, the Domain’s annual First Home Buyer report finds.

Sydney’s 33.1 per cent house price growth for 2021 would require first-time buyers to save for an additional 18 months – more than three times longer than the additional time needed in the previous year – for a total of eight years and one month.

The northern beaches are among the toughest house markets for first-time buyers to break into across the country. The time it takes to save for a deposit has ballooned by up to an additional six years and 11 months for a total of 27 years and seven months.

The extra time needed to save the 20 per cent deposit has more than doubled in Canberra, Hobart and Adelaide and climbed six-fold in Melbourne during the past year.

It would now take home buyers seven years and one month to save for the deposit in Canberra, five years and 10 months in Hobart, four years and seven months in Adelaide and six years and six months in Melbourne.

“In a climate where incremental wage growth and rising mortgage repayments and rental prices are paired with escalating property prices, the prospect of saving the lump sum deposit is becoming more challenging,” said Nicola Powell, Domain’s chief of research and economics.

“We’ve got tight vacancy rates and with the international borders reopening, we’re likely to see rents continuing to rise, which makes it tough for renters to put spare cash aside for that deposit.”

For first home buyers willing to compromise on the housing type, units offer a faster way to get into the property ladder, Dr Powell said.

“Unit prices growth was more modest compared to houses, which means you need a smaller deposit,” she said.

It was a smaller deposit, but it still took first home buyer and social worker Holly Marchioni more than four years, working two jobs and saving diligently to come up with the required amount to buy her two-bedroom unit in Bendigo, Victoria.

“I was studying full time to become a social worker when I first started working two jobs to save the deposit because I really wanted a place of my own,” she said.

“I’ve since graduated and am now working full time, but I continued to work two jobs because prices have risen so much. It was terrifying to see prices go up within weeks or months, so I decided to ramp up my savings and buy as soon as I had saved enough money.

“I recently moved into my two-bedroom unit and couldn’t be happier. It’s a relief not to have someone else control your housing for you. Now I have security and stability. My sacrifices were all worth it.”

Across the combined capitals, first home buyers would shave two years and two months if they opted for a unit rather than a house. Buyers would cut two years and seven months in Sydney, two years and two months in Melbourne and three years and four months in Canberra.

Aspiring homeowners buying a unit in other capitals will slash between one year and one month to a year and eight months.

The prospects of a higher interest rate later this year could help shorten the time needed to save a deposit as prices fall, Dr Powell said.

“We’re already seeing various metrics soften, which indicate the market is moving into the next stage of the property cycle, so by this time next year, we might start to see that time to save nudge slightly downwards,” she said.

“The higher interest rate put a damper on demand as it does impact the amount that you can borrow and reduces the number of buyers in the market, which is good for a first home buyer, and the rising interest rates also means that they get better interest accrued on their savings.

“But it does mean that they will be paying slightly more in their mortgage repayments and higher rents.”

This article is from Australian Financial Review, please click the following link for the original article: https://www.afr.com/property/residential/saving-up-for-a-home-deposit-here-s-how-long-it-could-take-20220321-p5a6gu

 

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