Melbourne first-home buyers need six years to save a deposit for an entry-level home
Melbourne’s first-home buyers are not taking any longer to enter the housing market than they were this time last year, a new report has found, despite the pandemic property boom that has seen house prices soar in 2021.
It still takes six years and one month for the average first-home buyer couple to save a 20 per cent deposit for an entry-level house, Domain’s First-Home Buyer Report revealed on Monday. That’s a whole year less than it takes first-home buyers in Sydney, where the time it takes to save has blown out by another six months since last year, and only one month more than in Canberra, where it takes six years.
The report assumes buyers are aged 25-34, on an average wage and able to save 20 per cent of their post-tax income each month without receiving any other financial help. The entry-level price is based upon the 25th percentile – in Melbourne, that figure is $631,000.
While it may come as a surprise that the time it takes first-home buyers to save has not risen – given that Melbourne’s median house price rose $45,000 in the space of just three months earlier this year – Domain senior research analyst Nicola Powell said there were a couple of factors at play.
“Yes, the time to save a deposit for an entry-priced house in Melbourne has certainly bucked the rising trend,” she said.
“One reason is because the majority of Melbourne’s house price growth has been in the upper segment of the market. The lower segment of the market, which is what this modelling worked with, did see price growth as well but not by as much as the upper end.
“The other reason is wage growth. Although wage growth in this segment of the market has been small, it’s been enough, when coupled with the federal government tax cuts, to outpace the amount needed to save for an entry-level home.”
Depending on where a buyer is house-hunting in Melbourne, the time it takes to save for a deposit can vary wildly. While the average time it takes to save is six years and one month, in the most expensive areas of Melbourne, it can take first-home buyers more than 16 years of saving to buy an entry-level home.
In Boroondara, first-home buyers would need to save for a massive 16.5 years to save for the $340,000 deposit required.
The biggest leap in savings time was in Manningham, where it now takes an extra 18 months than it did last year – first-home buyers there need to save for 11.5 years for a 20 per cent deposit.
There are quicker ways for first-home buyers to break into the market. Buying an apartment, the data showed, is a faster path – it takes four years and three months to save the deposit for a $440,000 entry-level property.
State and federal government incentives are also helping first-home buyers fast track their way into the market.
Incentives like the First Home Loan Deposit Scheme (FHLDS), and First Home Super Saver Scheme (FHSSS) have almost halved the time it takes to save for a deposit, the data showed.
These are the incentives being used by many buyers in Melbourne’s first-home-buyer heartlands in the outer west, where many are seeking a house with land for a cheaper price.
Savings times in Melton and Bacchus Marsh are the shortest across the city, taking just 4.5 years for the $94,800 deposit needed for an entry-level home.
“We’ve seen lots of first-home buyers using the FHLDS and lots using parents [acting] as guarantors to get their foot into the market,” Barry Plant Melton director and auctioneer Ned Nikolic said. “The average sale price here is still around the mid-$400,000s so they can have their cake and eat it too.
“Buyers can have a home with more land, buy new furniture if they want to and still have enough money to go on a family holiday,” he said.
Ref: MELISSA HEAGNEY | SENIOR JOURNALIST (on 21 Jun 2021). Melbourne first-home buyers need six years to save a deposit for an entry-level home. Retrieved from https://www.domain.com.au/news/melbourne-first-home-buyers-need-to-save-for-more-than-six-years-to-buy-the-average-melbourne-home-report-1064545/.
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