Time for first homebuyers to save deposit for a property blows out to 11 years

The amount of time it takes for first homebuyers in Australia to save for a deposit for a property has blown out to more than a decade as prices radically outstrip wages.

A new report by ANZ and property data firm CoreLogic shows that the median 20 per cent deposit to purchase a property in Australia – which includes both units and houses – is now $147,795.

On a median weekly household income of $1665, it would now take first-timers 11.4 years to save for the 20 per cent deposit required to avoid paying Lenders Mortgage Insurance or LMI.

First homebuyers on a median wage are facing record long waits to save for a deposit. (AAP)

Across Australia’s combined capital cities that figure falls slightly to 11.2 years, while across the nation’s combined regional centres it falls to 10.5 years.

Head of Australian Research at CoreLogic Eliza Owen said record high prices are driving up the “significant barrier” of saving for a deposit.

“The national median dwelling value is now an estimated 8.5 times the median annual household income level nationally,” Owen said.

“This is a record high and an increase from 6.8 times since the onset of COVID-19 two years ago.

“Moreover, the increase in the dwelling value to income ratio was largest across regional Australia, where property prices have risen substantially more than incomes.”

First homebuyers are being forced to radically live below their means for over a decade to enter the market. (ANZ Bluenotes/CoreLogic)

The report found that the cost of renting in Australia is now almost on par with the cost of servicing a mortgage, moreso in rental markets known for their lifestyle attributes.

In places such as Bourke (NSW), the Grampians (Victoria), East Pilbara (Western Australia) and Far North Queensland it is now cheaper to buy than it is the rent.

As of March 2022, advertised rents around Australia are around 13 per cent higher than they were prior to the pandemic.

Recent research by financial comparison site Finder correlates the sharp rise in asking rents, revealed that almost half of surveyed renters report struggling to pay their rent in April 2022.

“This spike in rental costs is putting a lot of pressure on tenants, and it’s leaving them with very little money left over for other necessities,” said Sarah Megginson, Finder’s senior editor of money.

“Once they pay the rent – life is very hard.

“Some tenants simply can’t afford the rapid increase in their rent in such a short amount of time and there are even stories of families being forced out to live in their cars, or in makeshift tents in the street.”

In ‘lifestyle’ rental markets it is now cheaper to service a mortgage than it is to lease a property.

Megginson recommended that people struggling to pay their rent try to negotiate with their property manager and do an “emergency audit” of the household budget.

“If you can’t afford your rent and you have a lease now, reach out to your property manager and see if you can come to an agreement with your landlord,” she said.

“Those currently in a house could consider downsizing to a townhouse or unit, as rent increases for apartments have not been as steep.

“Slash all unnecessary expenses and do an emergency audit of all utilities to see where you can save money on things like energy bills and insurance.”

Australians at risk of homelessness can call the Homelessness Hotline on 1800 474 753, or the National Debt Helpline on 1800 007 007.

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Reference-www.9news.com.au

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