How long does it take first home buyers to save a deposit in each capital city?

How long does it take first home buyers to save a deposit in each capital city?

First home buyer couples in Sydney might have to wait 10.5 years to save for a house deposit, and 6.17 years for a unit deposit, according to data from Domain.

Domain have released the 2018 First Home Buyers Report, showing the lowest entry price and quickest path to purchase for first home buyers across Australia’s capital cities.

The findings painted a bleak picture for single first home buyers, with their time doubling to break into the property market.

2018 First Home Buyers Report found:

  • “Softer market conditions in most Australian capital cities have presented first home buyers a window to put into place a savings plan and overcome the deposit hurdle.
  • Access to the First Home Super Saver Scheme from July 1 will further support first home buyers to enter the market quicker, with the ability to access funds from personal contributions to put towards a deposit.
  • In Greater Sydney, the average time for first home buyers to save for an entry price property has been flat year-on-year – equating to 6.7 years for a house deposit and 5.8 years for a unit deposit.
  • In Greater Melbourne, price growth is now slowing and the average time to save a deposit for a house is 6 years and for units, it’s 4.2 years.
  • Greater Adelaide and Greater Perth come out on top: home to areas with some of the lowest entry prices and quickest paths to purchase for houses, nationally.
  • For units, Greater Adelaide, Greater Perth and Greater Hobart offer areas with the lowest entry point and the shortest time for first home buyers to save a deposit.” 

How is deposit time calculated?

Deposit saving time is calculated by comparing salary and entry-level price.

“With the average age to purchase a first home being 34, the report is based on the average income for couples between 25-34 years old in each capital city. ABS wage data is used to provide an estimate of current salary by factoring wage price growth using the ABS Wage Price Index (WPI).

The time required to save a deposit is based on a dual income, with each person saving 20 per cent of their post-tax income monthly that is deposited in a standard online savings account (interest earned is taxed at the individuals’ tax rate).”

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Source: Domain.com.au

Domain’s Data Scientist, Dr Nicola Powell, stated that for first time home buyers, “the property market can be daunting.”

“That’s why we’ve released Domain’s First Home Buyers Report. The report aims to make it easier for home hunters to determine the areas that offer the most promise based on locations that offer the quickest path to purchase, budget and proximity to the nearest CBD.

“While there are many factors to consider when making a purchase, the report shows there are options across every capital city,” said Dr Powell.

Greater Sydney

For the Greater Sydney area, Domain’s 2018 First Home Buyers Report found that for houses and units, Wyong on the Central Coast had the lowest entry price and time taken to save a 20 per cent deposit.

HOUSES

  • Lowest = Wyong – entry price of $483,000 and time taken to save a 20 per cent deposit of 4.7 years.
  • Highest = The Hills Shire – entry price of $1,100,00 and time taken to save a 20 per cent deposit of 10.5 years.

UNITS

  • Lowest = Wyong – entry price of $375,000 and time to save a 20 per cent deposit of 3.67 years.
  • Highest = Sutherland Shire – entry price of $643,000 and time taken to save a 20 per cent deposit of 6.17 years.

The report also noted that Greater Sydney has the longest path to purchase, indicative of the soaring housing prices in the area. Further, seven of the top 20 entry prices identified fall below $650,000, meaning they are eligible for transfer duty exemption.

Greater Melbourne

For the Greater Melbourne area, Domain’s 2018 First Home Buyers Report found that Melton had the lowest entry point and time taken to save a 20 per cent deposit for houses, and for units, Greater Dandenong was the lowest for both categories. 

HOUSES

  • Lowest = Melton – entry price of $424,000 and time to save a deposit of 4.33 years.
  • Highest = Moonee Valley – entry price of $815,000 and time to save a deposit of 8.33 years.

UNITS

  • Lowest = Greater Dandenong – entry price of $305,000 and time to save a deposit of 3.17 years.
  • Highest = Yarra Ranges – entry price of $455,000 and time to save a deposit of 4.67years.

The report also noted that Greater Melbourne had experienced the biggest jump in the time taken to save for a house, an impact of the influx of first home buyers increasing demand. Despite this influx, Melbourne figures still remained below that of Sydney.

Greater Brisbane

For the Greater Brisbane area, Domain’s 2018 First Home Buyers Report found that Ipswich  came out on top for lowest entry point and time taken to save a 20 per cent deposit for houses. For units, the Brisbane area of Logan topped the list.

HOUSES

  • Lowest = Ipswich – entry price of $327,000 and time to save a deposit of 3.33 years.
  • Highest = Brisbane – entry price of $537,500 and time to save a deposit of 5.42 years.

UNITS

  • Lowest = Logan – entry price of $229,000 and time to save a deposit of 2.33 years.
  • Highest = Redland – entry price of $385,000 and time to save a deposit of 3.92 years.

The report also noted that the number of first home buyers had increased in Queensland, likely thanks to the First Home Owner’s Grant. Further, in Greater Brisbane the time taken to save a 20 per cent deposit increased by one month from last year, with unit time falling by three months.

Greater Adelaide

For the Greater Adelaide area, Domain’s 2018 First Home Buyers Report found that Playford had the lowest entry price and time taken to save a 20 per cent deposit for houses. For units, Salisbury had the lowest of each category.

HOUSES

  • Lowest = Playford – entry price of $215,000 and time to save a deposit of 2.25 years.
  • Highest = Adelaide Hills – entry price of $445,000 and time to save a deposit of 4.75 years.

UNITS

  • Lowest = Salisbury – entry price of $200,000 and time to save a deposit of 2.08 years.
  • Highest = Unley – entry price of $298,000 and time to save a deposit of 3.17 years.

The report also noted the entry price for house and units in Greater Adelaide are the lowest of any mainland city. Further, the road to home ownership has “become harder in South Australia, as low wages growth coupled with housing price increases, creates a difficult market to buy in”.

Greater Perth

For the Greater Perth area, Domain’s 2018 First Home Buyers Report found that Kwinana had the lowest entry price and time taken to save a 20 per cent deposit for houses. For units, Mandurah had the lowest of each category.

HOUSES

  • Lowest = Kwinana – entry price of $268,000 and time to save a deposit of 2.42 years.
  • Highest = Bassendean – entry price of $385,000 and time to save a deposit of 3.50 years.

UNITS

  • Lowest = Mandurah – entry price of $215,000 and time to save a deposit of 1.92 years.
  • Highest = Vincent – entry price of $327,000 and time to save a deposit of 3.00 years.

The report also noted that Greater Perth is the second most accessible capital city for purchasing a home with a relatively low entry price and quick path to purchase. In fact, the state has the highest proportion of entry-level buyers of all the states and territories in Australia.

Greater Hobart

For the Greater Hobart area, Domain’s 2018 First Home Buyers Report found that Brighton had the lowest entry price and time taken to save a 20 per cent deposit for houses. For units, Glenorchy had the lowest of each category.

HOUSES

  • Lowest = Brighton – entry price of $215,000 and time to save a deposit of 2.42 years.
  • Highest = Hobart – entry price of $570,000 and time to save a deposit of 6.33 years.

UNITS

  • Lowest = Glenorchy – entry price of $195,000 and time to save a deposit of 2.17 years.
  • Highest = Hobart – entry price of $195,000 and time to save a deposit of 3.92 years.

The report also noted that Greater Perth is one of the most accessible capital cities in Australia with the lowest entry price for houses – if you’re looking in the outskirts of the city. Buying a house in Hobart itself would take you 6.3 years to save for.

Canberra

For Canberra, Domain’s 2018 First Home Buyers Report found that Holt had the lowest entry price and time taken to save a 20 per cent deposit for houses. For units, Curtin had the lowest of each category.

HOUSES

  • Lowest = Holt – entry price of $410,500 and time to save a deposit of 3.67 years.
  • Highest = Kambah – entry price of $475,000 and time to save a deposit of 4.25 years.

UNITS

  • Lowest = Curtin – entry price of $235,000 and time to save a deposit of 2.08 years.
  • Highest = Watson – entry price of $315,000 and time to save a deposit of 2.83 years.

The report also noted that Canberra was “designed as a satellite city with hubs across the territory”, so most of the affordable areas are located on the territory fringe.

Further, although the ACT government abolished stamp duty on new and established homes for first home buyers on an annual household income of $160,000 or less, it’s set to introduce a new policy next year. Domain’s Data Scientist, Dr Nicola Powell, argues that once these new initiatives are in place, an “influx of first home buyers” are expected.

Greater Darwin

For the Greater Darwin area, Domain’s 2018 First Home Buyers Report found that Berrimah had the lowest entry price and time taken to save a 20 per cent deposit for houses. For units, Nightcliff had the lowest of each category.

HOUSES

  • Lowest = Berrimah – entry price of $281,000 and time to save a deposit of 2.42 years.
  • Highest = Tiwi – entry price of $455,000 and time to save a deposit of 3.92 years.

UNITS

  • Lowest = Nightcliff – entry price of $200,000 and time to save a deposit of 1.75 years.
  • Highest = Larrakeyah – entry price of $440,000 and time to save a deposit of 3.75 years.

The report also noted that the time needed to save for a house or unit in Greater Darwin has fallen over the past year, becoming 11 months quicker to save for an entry price house deposit and nine months quicker to save for an entry price unit deposit.

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Learn more about home loans

What is a low-deposit home loan?

A low-deposit home loan is a mortgage where you need to borrow more than 80 per cent of the purchase price – in other words, your deposit is less than 20 per cent of the purchase price.

For example, if you want to buy a $500,000 property, you’ll need a low-deposit home loan if your deposit is less than $100,000 and therefore you need to borrow more than $400,000.

As a general rule, you’ll need to pay LMI (lender’s mortgage insurance) if you take out a low-deposit home loan. You can use this LMI calculator to estimate your LMI payment.

How do I save for a mortgage when renting?

Saving for a deposit to secure a mortgage when renting is challenging but it can be done with time and patience. If you’re on a single income it can be even more difficult but this shouldn’t discourage you from buying your own home.

To save for a deposit, plan out a monthly budget and put it in a prominent position so it acts as a daily reminder of your ultimate goal. In your budget, set aside an amount of money each week to go into a savings account so you can start building up the ‘0’s’ in your account.  There are a range of online savings accounts that offer reasonable interest, although some will only off you high rates for the first few months so be wary of this.

If you aren’t able to save a large deposit, you can consider ways of entering the market that require small or no deposits. This can include getting a parent to act as guarantor for your home loan or entering the market with an interest only loan.

Savings over

Select a number of years to see how much money you can save with different home loans over time.

e.g. To see how much you could save in two years by switching mortgages,  set the slider to 2.

Does Australia have no-deposit home loans?

Australia no longer has no-deposit home loans – or 100 per cent home loans as they’re also known – because they’re regarded as too risky.

However, some lenders allow some borrowers to take out mortgages with a 5 per cent deposit.

Another option is to source a deposit from elsewhere – either by using a parental guarantee or by drawing out equity from another property.

What are the pros and cons of no-deposit home loans?

It’s no longer possible to get a no-deposit home loan in Australia. In some circumstances, you might be able to take out a mortgage with a 5 per cent deposit – but before you do so, it’s important to weigh up the pros and cons.

The big advantage of borrowing 95 per cent (also known as a 95 per cent home loan) is that you get to buy your property sooner. That may be particularly important if you plan to purchase in a rising market, where prices are increasing faster than you can accumulate savings.

But 95 per cent home loans also have disadvantages. First, the 95 per cent home loan market is relatively small, so you’ll have fewer options to choose from. Second, you’ll probably have to pay LMI (lender’s mortgage insurance). Third, you’ll probably be charged a higher interest rate. Fourth, the more you borrow, the more you’ll ultimately have to pay in interest. Fifth, if your property declines in value, your mortgage might end up being worth more than your home.

How much deposit will I need to buy a house?

A deposit of 20 per cent or more is ideal as it’s typically the amount a lender sees as ‘safe’. Being a safe borrower is a good position to be in as you’ll have a range of lenders to pick from, with some likely to offer up a lower interest rate as a reward. Additionally, a deposit of over 20 per cent usually eliminates the need for lender’s mortgage insurance (LMI) which can add thousands to the cost of buying your home.

While you can get a loan with as little as 5 per cent deposit, it’s definitely not the most advisable way to enter the home loan market. Banks view people with low deposits as ‘high risk’ and often charge higher interest rates as a precaution. The smaller your deposit, the more you’ll also have to pay in LMI as it works on a sliding scale dependent on your deposit size.

Why was Real Time Ratings developed?

Real Time RatingsTM was developed to save people time and money. A home loan is one of the biggest financial decisions you will ever make – and one of the most complicated. Real Time RatingsTM is designed to help you find the right loan. Until now, there has been no place borrowers can benchmark the latest rates and offers when they hit the market. Rates change all the time now and new offers hit the market almost daily, we saw the need for a way to compare these new deals against the rest of the market and make a more informed decision.

How does Real Time Ratings work?

Real Time RatingsTM looks at your individual home loan requirements and uses this information to rank every applicable home loan in our database out of five.

This score is based on two main factors – cost and flexibility.

Cost is calculated by looking at the interest rates and fees over the first five years of the loan.

Flexibility is based on whether a loan offers features such as an offset account, redraw facility and extra repayments.

Real Time RatingsTM also includes the following assumptions:

  • Costs are calculated on the current variable rate however they could change in the future.
  • Loans are assumed to be principal and interest
  • Fixed-rate loans with terms greater than five years are still assessed on a five-year basis, so 10-year fixed loans are assessed as being only five years’ long.
  • Break costs are not included.

Will I have to pay lenders' mortgage insurance twice if I refinance?

If your deposit was less than 20 per cent of your property’s value when you took out your original loan, you may have paid lenders’ mortgage insurance (LMI) to cover the lender against the risk that you may default on your repayments. 

If you refinance to a new home loan, but still don’t have enough deposit and/or equity to provide 20 per cent security, you’ll need to pay for the lender’s LMI a second time. This could potentially add thousands or tens of thousands of dollars in upfront costs to your mortgage, so it’s important to consider whether the financial benefits of refinancing may be worth these costs.

What is Real Time Ratings?

Real Time RatingsTM ranks home loans according to cost and flexibility. This allows you to compare products using a simple score out of five.

Our world-first system analyses almost 4,000 mortgages based on your individual requirements. Best of all, the results are generated in real time, so if a lender has just hiked its interest rates or introduced extra fees, our system has factored this in.

How do I take out a low-deposit home loan?

If you want to take out a low-deposit home loan, it might be a good idea to consult a mortgage broker who can give you professional financial advice and organise the mortgage for you.

Another way to take out a low-deposit home loan is to do your own research with a comparison website like RateCity. Once you’ve identified your preferred mortgage, you can apply through RateCity or go direct to the lender.

How common are low-deposit home loans?

Low-deposit home loans aren’t as common as they once were, because they’re regarded as relatively risky and the banking regulator (APRA) is trying to reduce risk from the mortgage market.

However, if you do your research, you’ll find there is still a fairly wide selection of banks, credit unions and non-bank lenders that offers low-deposit home loans.

Do mortgage brokers need a consumer credit license?

In Australia, mortgage brokers are defined by law as being credit service or assistance providers, meaning that they help borrowers connect with lenders. Mortgage brokers may not always need a consumer credit license however if they’re operating solo they will need an Australian Credit License (ACL). Further, they may also need to comply with requirements asking them to mention their license number in full.

Some mortgage brokers can be “credit representatives”, or franchisees of a mortgage aggregator. In this case, if the aggregator has a license, the mortgage broker need not have one. The reasoning for this is that the franchise agreement usually requires mortgage brokers to comply with the laws applicable to the aggregator. If you’re speaking to a mortgage broker, you can ask them if they receive commissions from lenders, which is a good indicator that they need to be licensed. Consider requesting their license details if they don’t give you the details beforehand. 

You should remember that such a license protects you if you’re given incorrect or misleading advice that results in a home loan application rejection or any financial loss. Brokers are regulated by the Australian Securities & Investment Commission (ASIC), as per the National Consumer Credit Protection (NCCP) Act. 

What are the responsibilities of a mortgage broker?

Mortgage brokers act as the go-between for borrowers looking for a home loan and the lenders offering the loan. They offer personalised advice to help borrowers choose the right home loan for their needs.

In Australia, mortgage brokers are required by law to carry an Australian Credit License (ACL) if they offer credit assistance services. Which is the legal term for guidance regarding the different kinds of credit offered by lenders, including home loan mortgages. They may not need this license if they are working for an aggregator, for instance, as a franchisee. In both these situations, they need to comply with the regulations laid down by the Australian Securities and Investments Commission (ASIC).

These regulations, which are stipulated by Australian legislation, require mortgage brokers to comply with what are called “responsible lending” and “best interest” obligations. Responsible lending obligations mean brokers have to suggest “suitable” home loans. This means loans that you can easily qualify for,  actually meet your needs, and don’t prove unnecessarily challenging for you.

Starting 1 January 2021, mortgage brokers must comply with best interest obligations in addition to responsible lending obligations. These require mortgage brokers to act in the best interest of their customers and also requires them to prioritise their customers’ interests over their own. For instance, a mortgage broker may not recommend a lender who gives them a commission if that lender’s home loan offer does not benefit that particular customer.