Dream of ownership fading for first home buyers

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DESPITE recent price falls, 90% of Australian first home buyers are stressed about their chances of saving enough for a home deposit, as the cost of living and house prices continue to eclipse wages.

According to Canstar’s First Home Buyer Survey of 679 potential first home buyers, 42% reported feeling very or extremely stressed about accumulating enough savings for a deposit to enter the market and a further 48% felt somewhat stressed.

“There’s a few market forces working against first home buyers right now but like other buyers before them, there’s always going to be a way to buy,” said Effie Zahos, editor-at-large and money expert at Canstar.

“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.

The survey found that 63% of first home buyers were targeting homes priced between $400,001 to $800,000, while 16% plan to spend $400,000 or less and 21% are looking to buy a property valued at more than $800,000.

“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,” added Zahos.

The goal size for a home deposit was more evenly split, with 36% looking to save a deposit up to 10% and 37% planning to save a deposit between 11% and 20%.

Canstar analysis found that with the median house price current at $816,659, first home buyers would have to save at least $81,666 for a 10% deposit and $163,332 for a 20% deposit.

“Saving a 20 percent 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,” said Zahos.

62% of hopeful first home buyers reported to saving towards their deposit every month, managing on average to save $1,417.

At the same time, 31% are unsure how much they are saving and a further 7% fear they aren’t saving anything for a deposit.

“Rising living costs and surging rents mean first home buyers are facing an uphill battle when it comes to their savings. Property affordability remains a major obstacle first home buyers are desperately trying to overcome, which certainly isn’t easy given wage growth remains slow,” said Zahos.

Survey respondents found that bills and household expenses were the top hurdles preventing saving money each month at 59%, followed closely by rent at 53% and going out or eating out at 43%.

79% of respondents also reported to receiving no financial contributions from parents or family for their home deposit.

“The bank of mum and dad is likely to be shut for some time. With super funds delivering negative returns 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. First home buyers can either sit back and wait for mum and dad’s support or use this time effectively to surcharge their savings,” said Zahos.

Many are also facing the added roadblock of depending on a sole income, with 45% of those surveyed looking to buy alone, while 51% are buying with one other person, 3% are buying with multiple people and 1% are unsure who they are buying with.

“It would take a dual income couple over six and a half years to save a 20 percent deposit for the national median house price of $816,659, while a single buyer would take close to 13 years. Even a 10 percent 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,” added Zahos.

Meanwhile 70% of those surveyed are looking for aid through state and federal government first home buyer grants and schemes.

“The recent government announcements around extensions to home buyer grants should hopefully improve the situation for some buyers and speed up the buying process, especially for those going it alone without a cash boost from family members,” concluded Zahos.

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