Young Sydneysiders now need to save for more than eight years to amass a deposit
First-home buyers in Sydney now need more than eight years on average to save for a deposit, according to new data from Domain.
A young couple with an average income would need to save for eight years and one month to sock away a 20% deposit for a Sydney house worth $900,000, according to Domain’s First Home Buyers Report for the December quarter, released Wednesday.
That’s 18 months longer than it took to save a 20% deposit a year ago, and significantly longer than the time it would take to save a deposit in other capital cities, according to The Sydney Morning Herald. First-home buyers in Canberra, the second-most expensive capital, need seven years and one month to save for a deposit, while those in Melbourne need six years and six months.
People in the market for a Sydney apartment worth $618,500 would need five years and six months to save a deposit, a one-month increase on the previous year, according to Domain.
Nicola Powell, Domain’s chief of research and economics, said that it had become extremely difficult for first-home buyers to amass a deposit in the rising market.
“First-home buyers are facing a growing financial hurdle when it comes to saving a deposit, and this is becoming more daunting in the context of rising living costs, low wage growth, weak saving rates and the rapid rise in property prices,” Powell told the Herald.
Even in Sydney’s most affordable regions, St Marys and Mount Druitt, it would take nearly six years for a couple to save a 20% deposit, the Herald reported. Those looking for apartments would need to save for more than three years.
The Domain report assumes a 25- to 35-year-old couple with average earnings for their area saves 20% of their post-tax income every month, deposited in a standard online savings account. It doesn’t consider transaction costs or stamp duty. It defines entry-level homes as those in the 25th percentile, the more affordable end of the housing market, the Herald reported.
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In Sydney’s more expensive north eastern suburbs, it would take an average couple nearly 29 years to save an entry-level deposit. It would take more than 27 years in the Manly region, the Herald reported. Buyers would need to save for more than 15 years in suburbs like Ryde and Hunters Hill, Leichhardt, Strathfield, Burwood and Ashfield.
Home values rose nearly 10 times faster than wages last year, causing the time needed to save a deposit to spike significantly, ANZ senior economist Felicity Emmett told the Herald.
“[Dwelling] prices have gone up so much it would take a really significant decline in prices – or an enormous increase in incomes – to bring those sorts of ratios, in terms of deposit affordability, back to something close to the long-run average,” she said.
While house price growth has started to slow and is predicted to fall as interest rates rise, Emmett said she doubted that would improve affordability. She said that higher rates meant mortgage repayments would rise significantly.
“We’ve had this really large lift in house prices. It’s very unlikely we’re going to see that reversed,” Emmett said. “...[It’s} a sustained step-up in house prices that means it’s even more difficult for first-home buyers to get into the market.”
