Add CategoryThe journey to homeownership is increasingly challenging for first-home buyers in Australia, as the time needed to save a deposit has increased significantly.
Nationally, it takes around 5.6 years to save a deposit, a 14% rise compared to 10 years ago, but this figure varies across different states.
This timeframe is defined by how many years an average-income household needs to save 20% of their gross income to amass a 20% deposit on a median-priced home.
New South Wales (NSW) tops the list with a daunting 6.5-year savings period, despite having a higher average income than other regions.
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The primary reason for this is the steep median home prices in NSW.
In Sydney, the median property value has reached $1.1 million, while in regional NSW, it stands at $722,000.
Even if a household in NSW manages to save a 20% deposit, only 10% of homes from the past year would be affordable to them.
South Australia ranks second, with a 6.3-year savings period. Despite being one of the more affordable regions, Adelaide's median home value hit $788,000 last month, and in regional areas, it was $441,000.
Saving can take longer depending on what state you live in. Image: Getty.
Conversely, first-time buyers in Western Australia only need 3.8 years to save a deposit, making it the most feasible state for prospective homeowners.
A 20% deposit has become the standard requirement for obtaining home loans mainly because most mortgage lenders insist on this. Without it, borrowers are subjected to higher interest rates and must pay mortgage lender's insurance (LMI).
Despite these hurdles, there's been a slight increase in first-home buyers entering the market compared with pre-pandemic levels. This is primarily driven by tough rental market conditions, prompting those with the financial means to opt for buying instead of renting.
Additionally, support through government initiatives such as the First Home Guarantee Scheme and stamp duty exemptions have provided eligible buyers with opportunities to purchase homes with deposits as low as 5% – without paying LMI.
| Region | First Home Guarantee Cutoffs | Stamp Duty Exemption Cutoffs |
| Greater Sydney | $900,000 | $800,000 |
| Greater Melbourne | $800,000 | $600,000 |
| Greater Brisbane | $700,000 | $700,000 |
| Greater Perth | $600,000 | $450,000 |
| Greater Adelaide | $600,000 | No stamp duty if new build |
| Greater Hobart | $600,000 | $750,000 |
| Greater Canberra | $750,000 | No price threshold |
| Greater Darwin | $600,000 | N/A |
| Rest of NSW | $750,000 | $800,000 |
| Rest of Vic | $650,000 | $600,000 |
| Rest of Qld | $550,000 | $700,000 |
| Rest of WA | $450,000 | $450,000 |
| Rest of SA | $450,000 | No stamp duty if new build |
| Rest of Tas | $450,000 | $750,000 |
This significantly reduces the required savings time, though a smaller deposit means higher loan repayments and potentially cheaper property purchases.
However, these initiatives have expedited the path to homeownership for many.
In some states, first-home buyers can also avoid paying stamp duty, provided the property doesn't exceed certain price thresholds.
For instance, in the Australian Capital Territory (ACT), exemptions are available if buying off-the-plan or constructing a new house. Unfortunately, buyers in the Northern Territory (NT) do not benefit from such exemptions.
There is government assistance that can help buyers get their hands on the keys earlier. Image: Getty.
The time required to save for a home deposit remains a substantial barrier for many Australians.
While market conditions and state-specific variations greatly influence this, government initiatives have provided some relief.
Nevertheless, the dream of homeownership continues to demand considerable financial planning and discipline.