- Falling property prices, higher interest rates on savings and increased wage growth have reduced the time needed for a couple to save for an entry-priced property deposit across Australia.
- For entry-priced houses and units, all capital cities recorded a decrease in the time needed to save a deposit since last year, except for Adelaide.
- Sydney continues to have the longest time to save for an entry-priced house deposit, while Darwin has the fastest savings time.
It’s getting faster for first home buyers to get into the property market, with falling prices, higher interest and strong wages all cutting the time it takes to save for a deposit.
According to Domain’s First Home Buyer Report, first-time buyers are saving for a home deposit up to 13 months faster than they were this time last year.
The report found that the time needed to save for an entry-level-priced house has decreased by one month in Perth. In Sydney and Canberra is 13 months shorter.
While for an entry-priced unit, it ranged from two months shorter in Perth and Darwin to eight months shorter in Sydney and Melbourne.
The report reveals that Sydney continues to have the longest time to save an entry-priced house deposit, at six years and eight months, followed by Canberra at six years.
However, these cities also saw the largest annual reduced time to save for an entry-priced deposit since last year at 13 months shorter. Darwin is the best city for first-home buyers looking for an entry-priced house, with the fastest savings time at three years and six months.
While Adelaide was the only city to see an increase in the time needed to save for a deposit.
Dr Nicola Powell, Domain’s Chief of Research and Economics, said, “A time machine has been offered to first-home buyers across Australia, as falling property prices in certain cities, higher interest rates accrued on savings and wage growth have aligned to reduce the time to save for an entry-priced property deposit. Nationally, for a couple, it’s now become six months quicker for a first home buyer to purchase an entry-priced house and two months quicker for an entry-priced unit since this time last year.”
“Previously, rock-bottom interest rates greatly benefited mortgage holders, making it cheaper to borrow and repay a home loan. However, it was a key driver of property price growth, making time to save a deposit longer.
“This narrative has flipped since the Reserve Bank of Australia embarked on one of the most aggressive rate hiking cycles in history, escalating the cash rate to over a decade high. Now in 2023, first-home buyers are facing less competition and softer prices, reshaping the affordability conversation.”
Higher borrowing costs
Kareene Koh, General Manager and CEO of Domain Home Loans, said that the decline in property prices has helped buyers in shortening the time to save, but higher interest rates have seen the affordability of mortgage repayments deteriorate, adding a new level of complexity.
She said, “Rising mortgage rates have negatively impacted the costs associated with a home loan. The decline in prices has assisted buyers in shortening the time to save, but higher interest rates have seen the affordability of mortgage repayments deteriorate, adding a new level of complexity. It’s a difficult time for market entrants, but there’s still some good news. We’re seeing interest rates starting to stabilise providing a light at the end of the tunnel for the months to come.”
Rentvesting could be an option
Dr Powell said that first-home buyers need to consider property type and location, or even becoming a rentvestor, while also taking advantage of government incentives that can be advantageous in shaving off years to an entry-priced deposit.
She said, “It helps if a first-home buyer is flexible on the type of property and location they want. A neighbouring suburb or a unit in your ideal area might offer much better value. The decentralisation of our workforce has supercharged affordability for some with remote working bringing increased flexibility and greater housing choice. In saying this, we know that not everyone is able to do this, with lower-income workers often needing to be close to their workplace as they are unable to work from home.”
“When navigating the first-home buyer’s market, considering property type and location, or even becoming a rentvestor, can all be worthwhile. Government incentives can be advantageous in shaving off years to an entry-priced deposit such as the federal First Home Guarantee program which allows low-deposit purchases without mortgage insurance. In NSW and some other states, first home buyers can also take advantage of shared equity schemes which reduce the upfront and ongoing costs of taking out a home loan.”
