The idea of owning a second home can be incredibly appealing. It could be a holiday house or an investment property that can generate additional income. But is buying a second home the right decision for you? Let’s explore the key considerations and steps involved in purchasing a second property in Australia. Top Reasons for […]
How Long Does It Take for First-Home Buyers to Save a Deposit in Australia?
By Deltos Finance on February 10, 2024
As a first-time homebuyer, fulfilling your dream of homeownership can be challenging due to the rising home prices and mortgage rates. But there’s also another factor in play: saving for a house deposit. Today, we’ll discuss this particular issue and determine how long it typically takes most first-time buyers to save for a house deposit. We’ll also explore some strategies to help you accelerate your savings and enable you to buy your first home in Australia sooner than expected.
The Current State of Home Affordability in Australia
The dream of homeownership in Australia is under significant pressure due to a combination of factors that have led to a decline in housing affordability. The PropTrack Housing Affordability Report for 2023 paints a stark picture: a household earning the median income can now afford just 13% of homes sold across the country, marking the lowest share since records began in 1995. This is a huge drop from the period between 2019 and 2021, when affordability was at its peak, with a median-income household being able to afford around 40% of homes sold across Australia. The same report pointed out some improvements in the labour market and wage growth since the pandemic. Still, more is needed to offset the higher costs of home prices and mortgage rates—and speed up the time to save for a deposit.
Let’s Zero in on the House Deposit Dilemma
For first-home buyers, saving for a deposit has become increasingly difficult. The PropTrack report explained that a household earning average income would have to be frugal and designate 20% of their earnings for over five and a half years to accumulate a 20% deposit on a median-priced residential property. This timeframe has shortened slightly due to home price declines throughout 2022 and stronger wage growth, but the overall challenge remains significant.
The house deposit dilemma is compounded by the fact that the quality of housing that is affordable to potential first-home buyers has declined, particularly in terms of location and size. So, even when first-home buyers can save enough for a deposit, they may have to compromise on the quality or location of their first home.
So, How Long Does It Take? And Does Region Matter?
According to the same PropTrack report, the time required to save for a deposit varies considerably across different states and territories in Australia. In New South Wales, for instance, an average-income household would need to save for approximately 6.9 years to afford the median deposit requirement of $172,000. In Queensland, the timeframe is slightly more optimistic, with an average household needing about 5.4 years to save for a home deposit. Other states, such as Victoria, South Australia, and Tasmania, have an average saving time of around 6.2 years.
These regional variations in saving time reflect Australia’s diverse economic conditions and housing markets. Factors such as local employment opportunities, wage levels, and housing supply all play a role in determining how long it takes for first-home buyers to save for a deposit in different regions.
Here’s Good News: You Can Beat the Odds and Save Up Faster!
While the statistics may seem daunting, there are strategies that savvy first-home buyers can employ to accelerate their savings. Read on to learn how to save a house deposit quickly.
Automate Your Savings
Setting up a separate savings account and arranging for a portion of your salary to be directly deposited can help keep your house deposit savings on track without the temptation to overspend. Also, this set-and-forget approach allows you to save consistently, making the process less overwhelming and more manageable.
Leverage Government Schemes
First-home buyers in Australia have access to various grants and incentives that can help reduce the upfront costs of homeownership. For instance, the First Home Super Saver (FHSS) scheme enables you to designate money for your first home inside your superannuation fund, potentially speeding up the process. By making voluntary contributions to your super, you can take advantage of the concessional tax treatment of superannuation to grow your deposit faster. The scheme allows for the withdrawal of up to $50,000 of voluntary contributions for a home deposit.
You should also consider the five per cent deposit scheme for first-home buyers. It is officially known as the First Home Guarantee (previously referred to as the First Home Loan Deposit Scheme). Under this scheme, eligible individuals can purchase their first home with a deposit as low as 5% without having to pay Lenders’ Mortgage Insurance (LMI). LMI is typically required for home loans where the buyer’s deposit is less than 20% of the property’s value to protect the lender in case of a loan default. However, with the First Home Guarantee, the Australian Government acts as a guarantor for the loan, covering the risk and thus eliminating the need for LMI. That can help you enter the property market sooner.
Consider Reducing the Size of Your House Deposit
While a typical deposit is 20% of the purchase price, it’s possible to buy with a smaller deposit. As mentioned above, you can achieve that by using the First Home Guarantee. Doing so can reduce the time it takes to save. But be mindful of other factors; make sure that reducing the size of your house deposit doesn’t result in extremely high borrowing costs over the life of the loan. Weigh the pros and cons of a smaller deposit versus saving for a longer period to reach the 20% threshold.
Develop Good Money Habits
Developing good money habits is essential for reaching your savings goal. Pay off high-interest debts to avoid unnecessary interest payments, and consider opening a savings account with a competitive interest rate. Technology can improve your money habits, with various apps and tools available to help track spending and savings. That way, you can find non-essential expenses easily, cut back on them and then redirect those funds towards accelerating your house deposit savings.
Consider Investing
If you don’t need to buy a house immediately, you can try your hand at investing as early as now. Investing in shares or other assets could potentially offer higher returns than traditional savings accounts. While investing comes with risks, it can be a way to grow your savings more quickly if you’re comfortable with the level of risk involved.
You Can Buy Your First Home Soon
Saving for a first-home deposit in Australia is undoubtedly challenging—but not insurmountable. When you understand the current market conditions, set realistic savings goals, and employ strategic financial planning to speed up your home deposit savings, you can be closer to achieving your dream of owning your first home. Need more expert advice in saving for a house deposit, getting first-home buyer loans in Australia & other matters related to owning your first home? Don’t hesitate to give us a call. Our mortgage brokers in Hobart are ready to offer expert guidance.
Enquire Now
Find Your Perfect Finance Solution
Let's discuss your finance needs. We’re here to help.
More posts from Deltos Finance
How to Use Equity to Buy Another Property
As a homeowner, you’re sitting on a valuable asset that can do more than provide a roof over your head. Your property’s equity can be a powerful financial instrument to help you buy a second home or expand your real estate portfolio. So, whether you’re dreaming of a holiday home by the beach near Carlton […]
What to Know About the Home Loan Approval Process
Understanding the home loan approval process and knowing what to do at each stage can make it less intimidating. Today we’ll guide you through the stages, including what to do before lodging your application, when to apply, important considerations, and the support and tools available to make the process smoother. Before You Apply: What You […]
Cash-Out Refinancing: Tapping into Home Equity
As a homeowner in Australia, you may have built up significant equity in your property over the years. But did you know you can tap into this equity to access cash for various financial needs? This is where cash-out refinancing comes into play. In this article, let’s explore what cash-out refinancing is, how it works, […]
No More Stamp Duty: Tasmania’s Gift to New Homeowners
Imagine stepping into your first home without the burden of thousands of dollars in stamp duty. Sounds too good to be true? Well, for Tasmanian first-home buyers, this dream has now become a reality. The Tasmanian government has just delivered a game-changing gift that could save you up to $28,945 on your first home purchase. […]
The Australian Shared Equity Scheme Explained
These days, it’s not easy to break into the property market. That’s especially true for young and first-time homebuyers who encounter several obstacles, especially amidst rising inflation and interest rates. But don’t fret because there are ways to make homeownership more accessible and affordable. One of which is shared equity. The Australian shared equity scheme […]
Let’s Talk About Rentvesting in Australia
You might find the traditional path to homeownership challenging, especially with rising property prices in desirable areas. Plus, it usually takes an average Australian over five years to save for a home loan deposit for a median-priced residential property. Enter rentvesting—a strategic approach for getting a foot on the property ladder without compromising your lifestyle. […]
Redraw vs Offset: Which Should You Choose for Your Home Loan?
When taking out a home loan, you might focus too much on comparing rates and terms. We’re here to remind you to explore different home loan features before signing the dotted line. Two popular options that can help you save on interest and pay off your mortgage faster are redraw facilities & offset accounts. But […]
Let’s Talk About the Expanded First Home Guarantee Eligibility
Have you heard of the First Home Guarantee scheme? Did you know its eligibility has expanded to include more aspiring homeowners who previously faced barriers to entry into the property market? Today, let’s talk about the expanded First Home Guarantee eligibility to help you know whether you can maximise this scheme. A Refresher: What Is […]
The First-Home Buyers 5% Home Loan Deposit Scheme Explained
As a first-time home buyer in Australia, one of the biggest hurdles you’ll face is coming up with a substantial deposit. Traditionally, lenders have required a deposit of at least 20% of the property’s value, but what if you could secure your dream home with just a 5% deposit? That is possible through the First […]