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Are first-time buyers really closer to home?

First-time buyers can save a 20 per cent deposit two months faster now than they could a year ago but there is a catch, according to the latest data from Domain.

According to Domain’s 2024 First-home Buyer Report, completed in conjunction with Unloan, it now takes a couple aged between 25 and 34, four years and nine months to save a 20 per cent deposit for an entry-price house.

For an entry price unit the time to save a deposit has dropped one month.

But Domain Chief of Research and Economics Dr Nicola Powell said while the reduction was positive on the surface, it paid to dig into the figures a little more to understand the full picture.

“The current market still poses significant challenges for first-home buyers, given the record-high property prices and the ongoing cost-of-living crisis,” she said.

“While there has been a slight decrease in the time required to save compared to the previous year, it’s important to note the nuances involved.

“This decrease primarily applies to Australians who can save a consistent amount ongoingly and have experienced wage growth, as these factors are key drivers.”

On a capital city basis, first-home buyers can save a deposit for a house the fastest in Darwin at just three years and seven months, while it takes the longest for a couple to save a deposit for an entry priced house in Sydney at six years and eight months. 

For units, Darwin is again the fastest capital to save for a deposit at two years and three months, while Sydney again takes the longest at four years and six months.

But there are some cities where it takes longer to save a deposit on an entry priced house.

It now takes five months longer to save a deposit for a house in Adelaide than it did a year ago, while it takes four months longer to save for a unit.

In Brisbane it now takes four months longer to save a deposit for a house or a unit and in Perth it takes four months longer to save for a house and two months longer for a unit.

Dr Powell said the research also showed mortgage serviceability had also become stretched. 

To avoid mortgage stress it is recommended that homeowners dedicate less than 30 per cent of their income to repayments.

“Our data shows that mortgage serviceability is stretched across our capitals, as both entry-level house and unit home loan repayments surpass this comfortable threshold, accounting for 46.5 per cent and 30.7 per cent of income, respectively,” Dr Powell said.

“The stretched mortgage serviceability highlights the dual effect of high cash rates on first-home buyers.

“While there has been a slight reduction in the time required to save a deposit (for those who can consistently save and have experienced wage growth), the higher interest rates are also making home loan repayments more difficult, which is why more people are facing mortgage stress.”

Entry-priced houses in Sydney take the most of a couple’s income at 57.2 per cent, which is well above the mortgage stress benchmark of 30 per cent.

This is followed by Canberra (48.3 per cent) and Melbourne (45.4 per cent).

For entry-priced houses, Darwin offers the lightest burden, taking 29.2 per cent of a couple’s income. 

Perth is the next best city at 31.2 per cent, which sits just above the 30 per cent benchmark for mortgage stress.

Overall, Regional Australia offers the best affordability, with entry-priced units requiring 23.6 per cent of income and entry houses 30.8 per cent.

“The time to save, mortgage serviceability and record high property prices explains the growing reliance of some first-home buyers on financial support from the bank of mum and dad to secure a deposit,” Dr Powell said.

“For buyers eager to enter the market, there are opportunities to explore different types of homes or locations for better affordability.

“Property type and location are the keys to quicker market access. 

“This is why ‘rentvesting’ has gained popularity.” 

In Sydney, saving a 20 per cent deposit for an entry-price house is shortest in Wyong at five years and seven months, while in Melbourne it’s quickest in Melton-Bacchus Marsh (4y 6m).

In Brisbane it’s fastest to save a deposit in Cleveland-Stradbroke (4y 1m), the city is the fastest place in Perth to save a deposit (3y 3m), while for Adelaide it’s Playford (3y 11m), in Canberra it’s Tuggeranong (5y 6m) and in Darwin, Palmerston is the quickest (3y 5m).

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Kylie Dulhunty

Kylie Dulhunty is the Editor at Elite Agent.