An alarming number of first-home buyers are feeling stressed about scraping together a house deposit due to soaring living costs, stagnant wage growth, and sky-high house prices.
This was according to Canstar’s new First Home Buyer Survey, which revealed a staggering 90% of potential first-time buyers anguishing over saving a big enough house deposit to purchase a home, with 42% feeling very or extremely stressed and a further 48% feeling somewhat stressed.
When looking at the price range of a property to purchase, 63% said they were aiming for a home valued between $400,001 to $800,000, 16% were planning to spend $400,000 or less, while 21% had their eye on a property worth more than $800,000.
When it comes to deposit size, first-home buyers were fairly evenly split, with 36% aiming to save a 10% deposit, and 37% planning to save up to a 20% deposit. Canstar’s analysis showed that with the national median house price sitting at $816,659 according to CoreLogic, first-home buyers would need to scrape together $81,666 for a 10% deposit and $163,332 for a 20% deposit.
Effie Zahos, Canstar’s editor-at-large and money expert, said that even with a few market forces working against first-home buyers right now, “there’s always going to be a way to buy.”
“Faced with costly living expenses, rising rents, sky high property prices, lower borrowing limits, and all of this coupled with little to no wage growth, first-time buyers can be discouraged from thinking it’s possible to buy in today’s market,” Zahos said. “A saving grace is property prices are starting to fall and buyers will be looking at the trade-off between lower prices and higher mortgage costs compared to rising rents. Striking while the iron is hot and prices are off the boil could be the sweet spot for first-home buyers as long as they take a realistic view of the market and buy what they can afford. Saving a 20% deposit for an $800,000 house could put anyone off when they realise it could take them more than a decade to reach that goal. Switching focus to a unit in an entry-level suburb with a lower price point to cut the time to save will still be challenging, but it can mean getting on the ladder sooner.”
Canstar’s survey also found that some 62% of first-home buyer hopefuls put money towards their house deposit each month, setting aside $1,417 on average. Some 31% don’t know how much they’re saving, while a worrying 7% aren’t saving anything at all.
The survey identified the top-three barriers to growing house deposits quicker: bills and household expenses (59%), rent (53%), and going out and/or eating out (43%).
Zahos said the figures suggest that the key barriers to saving for a house deposit stem from both factors beyond their control, such as living costs, and factors they can control, including their personal lifestyle choices.
“Rising living costs and surging rents mean first home buyers are facing an uphill battle when it comes to their savings,” he said. “Property affordability remains a major obstacle first-home buyers are desperately trying to overcome, which certainly isn’t easy given wage growth remains slow.”
Zahos said consistency is key for anyone wanting to grow their house deposit savings and that it is important to look for ways to cut back whenever possible.
The “Bank of Mum and Dad” also appears to have tightened their purse strings, Canstar’s survey suggested, with the majority (79%) of first-home buyers not receiving any financial contributions from a parent or family member to help put together their deposit, compared to just 21% who were.
“The bank of mum and dad is likely to be shut for some time,” Zahos said. “With super funds delivering negative return for the first time in 13 years, inflation yet to peak and interest rates continuing to rise, many parents will be forced to focus on their own financial scorecard.”
Some 70% of first-home buyers instead were seeking help elsewhere, having applied or planning to apply for a state or federal government first-home buyer grant or scheme to help with their purchase.
Survey results also showed that 51% were planning to buy with one other person, while 45% were intending to snap up a property on their own. A further 3% were purchasing with multiple people and 1% were unsure who they were buying with at this stage.
“It would take a dual-income couple over six and a half years to save a 20% deposit for the national median house price of $816,659, while a single buyer would take close to 13 years,” Zahos said. “Even a 10% deposit would take a couple almost four years and a single more than seven years. This is a long time to be saving, and it's easy to see how buyers could become disheartened as living costs rise.”