Solutions for First-time Homeowners


The ANZ CoreLogic Housing Affordability report highlights the growing challenges for prospective first-time homebuyers, with rising property prices expected to make entry into the market even more difficult in the coming year

Eliza Owen, the Head of Research at CoreLogic, identifies a perfect storm of soaring rents, increasing home values, and higher interest rates, creating historically unprecedented hurdles for aspiring homeowners. The report anticipates that property prices will continue to climb as interest rates hold steady and may accelerate further when rates begin to decrease next year. This situation means that first-time buyers will need to save more substantial deposits, significantly extending the time required. Nationwide, house prices have already risen by 4.9 percent this year, with Sydney experiencing an 8.8 percent increase, resulting in an extended deposit-saving period, such as 12.3 years in Sydney to save a 20 percent deposit for an average home, up from 11.8 years in the previous quarter.

Percentage of Income required to cover a new mortgage | Uptain
Percentage of Income required to cover a new mortgage | Uptain

In Australia, there is a shift in focus from helping first-time buyers own homes to addressing the growing number of renters and the persistent shortage of affordable rental properties. Unfortunately, data suggests that the situation for first-time homebuyers is worsening, not improving.

While the housing market is expected to slow its price growth due to rising interest rates and increased housing supply, it won’t entirely halt the upward trend. Saving for a deposit has become more challenging, with notable increases in the time required in various cities.

Currently, a 20 percent deposit on the median home value in Australia represents 148 percent of the median household income, a significant rise from the five-year average of 136 percent. Inflation-adjusted incomes have also decreased, leaving less money for essential expenses, making it particularly tough for first-time buyers.

A study by Rate City shows that saving for a $1 million property with a $400 weekly savings plan in a 5 percent interest rate savings account would take nine years and one month. This calculation doesn’t account for potential interest rate fluctuations or taxes on earned interest, which could further extend the timeline. Additionally, the likelihood of property prices continuing to rise significantly adds to the challenge.

Rising property prices in Australia are pushing prospective homeowners to consider loans that strain their financial limits to secure desired homes. Overcoming deposit challenges and affordability assessments now forces them to allocate a larger portion of their income toward housing costs due to escalating property prices.

Housing affordability concerns have reached alarming levels, particularly in Sydney and Adelaide. Sydney residents must allocate a record 57 percent of their income for new mortgages, up from 51.6 percent in the previous quarter. In Adelaide, the second least affordable market, homeowners now need 47 percent of their income for an average home, marking a 3 percentage point increase from the previous quarter. Nationally, homeowners face dedicating 45.5 percent of their income to mortgage payments, up from 42.7 percent in the March quarter.

Eliza Owen, an industry expert, suggests that those entering the property market now and managing high mortgage costs may benefit from lower mortgage rates when the Reserve Bank of Australia (RBA) lowers rates next year, potentially leading to house price gains. However, this may intensify challenges for first-time homebuyers unable to enter the market in the near future, particularly those lacking financial assistance from their families, exacerbating issues of inequality.


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