First Home Buyers Need A Decade For Deposit
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First Home Buyers Need A Decade For Deposit

With housing prices on the rise, so too are the deposit demands.

By Terry Christodoulou
Thu, Apr 8, 2021 1:43pmGrey Clock < 1 min

Just over one in 10 (11%) of first home buyers now need to save for more than 10 years before breaking into the housing market.

A poll of 1028 first home buyers by comparison website Finder.com indicated that would-be buyers are taking longer to reach the 20% deposit threshold as the average deposit reaches six figures amid booming property prices.

One in four need between five and 10 years, nearly two in five (38%) need between two and five years, while only 7% manager to save the deposit within a year.

According to Finder, the required deposit for an average loan had risen by 16 per cent nationally in just two years, reversing any deposit affordability gains and taking the national average deposit price to $106,743.

First home buyers in NSW require $128,469 and $113,092 in Victoria. The average deposit in Tasmania has climbed to $81,438, to $85,710 in South Australia, to $95,784 in Queensland and to $92,784 in Western Australia.

“While low interest rates mean the cost of paying your mortgage each month has come down, rising property prices are lengthening the amount of time required to save for a deposit,” Finder spokeswoman Sarah Meggison said.

Further, more than half of first home buyers (53%) indicated they are spending more than 30 per cent of their income on their mortgage repayments, a sign of mortgage stress.

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Amid looming rate rises, there are reasons to be cheerful as mortgage holders head into 2023

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Mortgage holders should brace themselves for more pain as the Reserve Bank of Australia board prepares to meet tomorrow for the first time this year.

Most economists and the major banks are predicting a rise of 25 basis points will be announced, although the Commonwealth Bank suggests that the RBA may take the unusual step of a 40 basis point rise to bring the interest rate up to a more conventional 3.5 percent. This would allow the RBA to step back from further rate rises for the next few months as it assesses the impact of tightening monetary policy on the economy.

The decision by the RBA board to make consecutive rate rises since April last year is an attempt to wrestle inflation down to a more manageable 3 or 4 percent. The Australian Bureau of Statistics reports that the inflation rate rose to 7.8 percent over the December quarter, the highest it has been since 1990, reflected in higher prices for food, fuel and construction.

Higher interest rates have coincided with falling home values, which Ray White chief economist Nerida Conisbee says are down 6.1 percent in capital cities since peaking in March 2022. The pain has been greatest in Sydney, where prices have dropped 10.8 percent since February last year. Melbourne and Canberra recorded similar, albeit smaller falls, while capitals like Adelaide, which saw property prices fall 1.8 percent, are less affected.

Although prices may continue to decline, Ms Conisbee (below) said there are signs the pace is slowing and that inflation has peaked.

“December inflation came in at 7.8 per cent with construction, travel and electricity costs being the biggest drivers. It is likely that we are now at peak,” Ms Conisbee said. 

“Many of the drivers of high prices are starting to be resolved. Shipping costs are now down almost 90 per cent from their October 2021 peak (as measured by the Baltic Dry Index), while crude oil prices have almost halved from March 2022. China is back open and international migration has started up again. 

“Even construction costs look like they are close to plateau. Importantly, US inflation has pulled back from its peak of 9.1 per cent in June to 6.5 per cent in December, with many of the drivers of inflation in this country similar to Australia.”

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