First-home buyers taking longer to save deposits

A growing number of young buyers are saving for more than five years for their first home, a new survey shows.

It is another indication that the hurdle to home ownership is being raised higher, forcing more hopeful buyers onto the rental roundabout.

According to a recent study by Mortgage Choice, of 1000 recent first-home buyers surveyed, 23.4 per cent saved for more than five years, a 5.8 per cent jump from 2009.

They are also taking on more debt, with 56.1 per cent of the respondents putting down a deposit of no more than 10 per cent, compared with 47.6 per cent in 2014.

Mortgage Choice chief executive John Flavell said first-home buyers were having to save for longer than ever because property prices were rising faster than wages.

Citing data from the Australian Bureau of Statistics, he said that the average home loan had grown almost four times faster than the Australian full-time wage in the past two years.

“The average home loan size in Australia is now approximately 4.5 times larger than the average wage – up 25 per cent in the past two years.”

Robin Lim, head of mortgages product management at National Australia Bank, said the bank had seen borrowers taking on a growing level of debt with increasing house prices over the past year.

“Anecdotally, if they’re having to save up more to purchase their first home, now that first-home prices have increased year-on-year, there is a greater requirement, you would expect, for them to save,” he said.

Mr Lim said it was important for first-home buyers to also understand the costs associated with buying a home, such as stamp duty, bank fees and charges, legal costs and lender mortgage insurance premiums.

The First Home Owner Grant for established properties has been removed in all states and territories, and replaced with incentives for new dwellings.

Though most first-home buyers are purchasing established homes rather than new or off-the-plan, they believe the removal of stamp duty would help them more than a grant for an established property or being able to tap into their super fund.

The survey also reveals more first-home buyers are getting help from their parents or family members to get a foothold on the property ladder. Some bought with siblings and friends.

ME’s head of home loans Patrick Nolan said first-timers were looking at different ways to save and other avenues to home ownership such as purchasing an investment before a residence.

“It may be a bit cheaper, it might not be where they want to live, but it’s an investment and they’re on the property-owning ladder,” he said.

A recent survey by RF Intelligence, commissioned by ME, reveals the step change between the millennials’ view of how buying their first home has affected their lifestyle compared with older generations.

More than 2000 Australians, aged between 18 and 80, were asked about the sacrifices they made when they bought their first home.

Of the millennials surveyed, about one in five said they delayed having children or decided to have fewer children compared with one in 10 home owners aged between 51 and 80.

A larger proportion of millennials, aged between 18 and 34, also said they delayed or sacrificed starting their own business and chose a less expensive school for their children.