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First time buyers entering the market but face long battle to save deposit

First home buyers are showing increased interest in the property market, but for those looking to take the purchase leap, the time to save a deposit now averages more than four-and-a-half years.

These are the findings of a national report released today by Bankwest, who note 94,135 properties were bought by first home buyers in the year to August 2017. The figure reflects an increase of 5.6% year-on-year since 2015, and accounts for 14.3% of all purchases recorded from January to August.

Noting these were encouraging signs in an otherwise cooling market, Bankwest explained the average 20 per cent deposit now sits at $111,080 for a median-priced home.

Accruing that substantial cash amount takes the average first-time buying couple 4.6 years. This is three months longer than in 2016, and a $7173 increase on the $103,907 required last year.

In news that comes as little surprise, New South Wales residents require the largest deposit, taking an average of six years to save the $148,281 required. The figure is even more astounding in the city where wannabe Sydneysiders have to save for 8.2 years (up eight months on last year) to save the necessary $215,133 deposit.

Meanwhile, the most affordable state for first home buyers is Tasmania where the average required deposit is just $61,352, and takes couples 3.1 years to acquire.

For residents looking to really work hard for a first home, the highest deposit sum of any suburb in the nation goes to Perth’s Peppermint Gove where a 20 per cent deposit equates to $672,944 and takes an average of 21.2 years to acquire.

It narrowly pips Sydney’s Mosman at the post, where the time spent saving for a deposit now takes 20.4 years – four years longer than in 2016.  This is largely due to Mosman house prices appreciating by almost a third (29.8%) in the year to June 2017.

At the other end of the scale, the local government area of Dundas in southeastern WA is the area with the shortest saving time – just 0.7 years are needed to save the necessary 20% deposit of $16,346.

Bankwest General Manager Personal & Small Business Banking, Donna Dalby said in Australia’s major cities it was taking first-time buyer couples on average two months longer than last year to save enough to get their foot on the housing ladder, a fact seen in every major city except Perth and Darwin.

“Perth and Darwin as cities buck the national trend, being the two places where the savings times for first-time buyers have dropped year on year. Perth’s house prices have dropped by 4.3% which means the saving time to get the 20 per cent deposit of $103,046 (down $4,627 from 2016) has dropped by three months to 3.9 years.

“Likewise, WA as a whole is the most accessible mainland state for first-time buyers. Our report shows in WA it takes 3.6 years to save the necessary $94,651 deposit,” she added.

“Low interest rates and a 6.9% increase in house prices with sluggish wage growth of only 2% during the same period are making it increasingly difficult for first time buyers to get a foot on the property ladder.

“While lower interest rates are beneficial for those who already own their homes in the form of lower loan repayments and interest, they can also bring more buyers into the market and this can drive up house prices, making homeownership less affordable for first-time buyers.”

The report also shows that first-time buyer couples could do well to consider opting for a unit rather than a house as a first home. The average savings time for a unit across Australia is 4.2 years, 5 months less than the savings time for a house.

“Everyone dreams of having their own house but medium and high-density housing is on the increase across the country and can offer a noticeably quicker route to home ownership than aiming at a house purchase,” Ms Dolby said.

Key findings

  • The average 20% deposit required nationally is $111,080
  • 94,135 properties were purchased by first home buyers in the year to August 2017
  • First home buyer purchases are up nationally by 5.6% year on year since 2015
  • First home buyer purchases equate to 14.3% of buyer market
  • The average time to save a deposit for a first-time buyer couples is 4.6 years
  • Time spent saving is up by two months on 2016
  • NSW is the toughest market, requiring an average $148,281 deposit that takes six years to acquire.
  • Sydney is the toughest city, requiring an average $215,133 deposit that takes 8.2 years to save (up eight months on last year)
  • Darwin and Perth are the only cities where it now takes less time than last year to save a deposit.
  • First-time buyer couples will need more time to save in 2017 in 85.5% (360 of 421) of local government areas across the nation.
  • Nationwide, only 13.5% (57 out of 421) of local government areas require less than two years to save a 20% deposit on a median-priced house, down from 18.1% (76 out of 421) in 2016. This is largely due to an additional 10 NSW regions moving above the two years to save threshold in the year to June 2017.

Download the Bankwest First Time Buyer Report November 2017  here

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