Deposit biggest barrier for first home buyers

Saving for a deposit is taking first home buyers longer than ever before, with the average household needing more than 10 years to save a 20 per cent deposit, according to the latest ANZ CoreLogic Housing Affordability report.

Based on households saving 15 per cent of their gross annual income, it would take a typical household that does not yet own a home a record 10.8 years to save for a house deposit and nine years for a unit.

The report uses multiple metrics to gauge the state of housing affordability across Australia, as property prices jumped 21.6 per cent over the 12 months to October 2021.

Senior ANZ Economist Felicity Emmett said while indicators of home values relative to income and the deposit hurdle have increased most substantially, serviceability of mortgages has been less impacted due to low borrowing rates.

“The number of loans taken out by first home buyers fell 27 per cent between January and September 2021 as housing values increased at a much faster pace than household incomes,” she said.

Inner city apartments present some of the best opportunities for both tenants and buyers while regional Australia has become less affordable as the pandemic and more flexible working arrangements increased migration to the regions.

Regional property values increased at a much higher rate than capital cities, jumping 18.1 per cent between March 2020 and June 2021, compared to 11.2 per cent for combined capital cities.

Renting in regional Australia is the least affordable on record, as the portion of income required to pay rent hit a record high of 32.7 per cent in June 2021, compared to 28.2 per cent for capital cities. As a result, there are a growing number of regions in every state where it is cheaper to service a mortgage than rent.

“As borders reopen and workers return to the city, we can expect to see some of these regional affordability constraints start to ease,” Ms Emmett said.

“However many challenges will remain, especially for those looking to enter the market, with significantly higher deposits, a tightening of lending restrictions, and higher mortgage rates all features of the 2022 housing market.”

Report highlights:

  • The portion of income required to service a new mortgage on a median dwelling value was 37.2% across Australia at the end of June 2021. This is the highest level since March 2012, when the cash rate was 4.25%
  • The estimated cost of servicing a new mortgage on the median dwelling value in Sydney, Australia’s most expensive capital city market is 49.1%
  • Melbourne is Australia’s most affordable city to rent relative to household income
  • Darwin, Perth and Brisbane are Australia’s most affordable cities to enter the housing market
  • The national dwelling value to income ratio reached a record high 7.7 in the June quarter 2021
  • Between the end of March 2020 and June 2021, Australian housing values increased 12.6% while median household incomes are estimated to have declined -0.2%
  • The cost of rent on a median dwelling accounts for 29.4% of household income, the highest on record

Download a copy of the full report here.

Download a list of locations where it is cheaper to buy versus rent.

Download a list of state insights.

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