Saving up sufficient funds for a home deposit requires discipline — there’s nothing new about that. However, it appears that soon-to-be homeowners are sacrificing their spending in order to get on the property ladder faster.
The findings outline some of the challenges involved with becoming a homeowner, though those who have secured real estate will no doubt be glad with the security it provides.
What’s holding Aussies back?
According to the 2014 Westpac Home Ownership Report, 40 percent of homeowners say the single most difficult aspect of buying a home is saving a deposit.
A high-interest savings account is a sage option for those looking to save an appropriate deposit, particularly as it has an incentive to refrain from making withdrawals from the account.
This option was reinforced by Gai McGrath, Westpac General Manager of Retail Banking.
“You can also make your money work harder for you by putting your savings in a high interest savings account, which rewards you for making regular contributions,” McGrath said.
How are Aussies pushing forward?
Many individuals saving for a home loan deposit have made sacrifices to their lifestyle in order to reach their savings goal faster.
The study found that 72 percent of savers made such sacrifices. Almost eight in 10 of home-deposit savers elected to eat at restaurants less often, while 61 percent chose to entertain at home, rather than spending their hard-earned dollars out on the town or at other entertainment venues.
“Small changes in your discretionary spending can result in big savings over time. This could be anything from going without that second takeaway coffee each day, reducing how often you go out for dinner or taking your lunch to work. All of these small changes can add up to thousands of dollars of savings a year,” McGrath stated.
It’s no wonder Australians are skimping on their favourite luxuries in order to save, given recent house price trends.
Sydney dwelling values have soared by 15.4 percent year-on-year to June according to the RP Data-Rismark June Hedonic Home Value Index. The median dwelling price as of June 30 was $690,000 – making a 20 percent deposit a whopping $138,000.
In Melbourne, the average price over the same period was $560,000, while in Darwin it was $535,000. Overall, the combined capital median dwelling price at June 30 was $545,000, putting pressure on homeowners to save up big money.
The importance of being realistic
A spot of reality is key, too.
According to McGrath, home-deposit savers are setting themselves up for disappointment if they don’t carefully analyse where they can cut down on spending, and where they can’t.
“If you’ve set yourself the goal of saving your deposit in two years, it’s unrealistic to think you can sacrifice everything for two years. Choose key areas where you can make sustainable but impactful sacrifices,” she noted.
Obtaining financial advice can help potential homeowners achieve their property goals faster, too.