First home buyers worse off than a year ago despite COVID-19 downturn

author-avatar By on September 24, 2020
First home buyers worse off than a year ago despite COVID-19 downturn

Photo by Anoof Junaid on Unsplash

New research from Domain reveals first home buyers are taking up to 6.5 years to save for a house deposit, up 2.6% from a year ago.

Those figures are from Domain's 'Home Buyers Report', and are for Sydney's 'entry-level' house prices and wage data on young people aged 25-34 years.

In Sydney, it now takes two months longer to save for a house deposit compared to a year ago.

For reference, Sydney's 'entry-level' house price is $680,000, while the median, according to earlier data from Domain was over $1,000,000.

Buying a home or looking to refinance? The table below features home loans with some of the lowest variable interest rates on the market for owner-occupiers.

Base criteria of: a $400,000 loan amount, variable, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. If products listed have an LVR <80%, they will be clearly identified in the product name along with the specific LVR. The product and rate must be clearly published on the Product Provider’s web site. Monthly repayments were calculated based on the selected products’ advertised rates, applied to a $400,000 loan with a 30-year loan term.

Elsewhere, time taken to save for a 20% deposit was more mixed, with Perth's time taken decreasing by one month compared to a year ago, down to three years and five months.

However, according to Domain's senior research analyst Dr Nicola Powell, affordability could improve in the next few months.

"Although the majority of capital cities saw the journey to homeownership become a little longer compared to the same time last year ... buying conditions have improved, first-home buyers appear to be taking advantage of retreating investor activity, reduced foreign buyer interest, the extension of the Federal Government’s first home loan deposit scheme and other state-based incentives," she said.

Overall the capital city that takes the shortest amount of time to save for a house is Darwin, taking just three years and one month - a one-month reduction compared to a year ago.

Its 'entry level' house price is $362,000.

For houses the breakdown across the capital cities is as follows:

City 'Entry-Level' House Price Time Taken to Save for a 20% Deposit Annual Change in Months
Sydney $680,000 6 years, 6 months +2
Melbourne $600,000 6 years +2
Brisbane $450,000 4 years, 6 months +1
Adelaide $375,000 3 years, 11 months 0
Perth $366,580 3 years, 5 months -1
Hobart $380,000 4 years, 2 months +3
Darwin $362,500 3 years, 1 month -1
Canberra $606,060 5 years, 5 months +4

Source: Domain

Over the past five years, however, things are a little different.

In Melbourne, it now takes 16 more months to save for a 20% deposit compared to five years ago - Hobart was second-highest at 15 more months.

Meanwhile, Darwin and Perth experienced slides of seven and six months respectively.

Unit prices a mixed bag

While house prices are generally higher compared to a year ago, unit prices are a mixed bag.

In Sydney, for example, the 'entry-level' unit price is $585,000.

It now takes first home buyers 5 years and 7 months to save up for a 20% deposit, which is one month longer than a year ago, but five months shorter than five years ago.

In Brisbane, the entry-level price is $328,000, taking 3 years and 3 months to save for a 20% deposit - down two months on a year ago, and seven months on five years ago.

In Darwin, that five-year figure is down 22 months, meaning it takes nearly two years less to save for a house deposit than it did in 2015.

The only city to record longer deposit-saving times for both time periods was Hobart, taking one month longer than a year ago, and a whole year longer than five years ago.

Dr Powell put Hobart's acceleration down to stagnant wages, a weak savings rate, yet a growing entry-level price growth for both houses and units.


Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2019. They are (in descending order): Credit Union Australia, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.

Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.

In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

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author-avatar
Harrison joined Savings in 2020. He is a journalist with more than four years of experience, with previous stints at News Corp and financial comparison site Canstar. With a keen interest in personal finance, Harrison is passionate about helping consumers make more informed financial decisions.

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