Saving a house deposit might seem more out of reach than ever before for many, but renters will be financially better off in the long run if they don’t give up.
The average deposit for a new home is now about $107,000, an increase of 16 per cent on January 2019, according to data released last month by Finder, based on Australian Bureau of Statistics figures.
Price-wise, the average national house price is now around $900,000, according to property listing site Domain.
If you don’t have help from the bank of mum and dad, it might seem too hard to bother saving a deposit for your first home, but if you can stay the course you will come out on top, a new report shows.
More than half of homes will be cheaper to buy than rent over the next 10 years (at current prices) the REA Insights Buy or Rent 2021 report reveals.
REA Group economist Paul Ryan said buying conditions are particularly favourable outside of NSW and Victoria, with more than 80 per cent of houses, and almost all units, are estimated to be cheaper to buy than rent.
“Many regions have hit all-time price records so it’s understandable that many people would be surprised to hear that it’s still more affordable to buy in more places than it is to rent,” he said.
“This research shows that much of the increase in demand we have seen in late 2020 and early 2021 has been driven by exceptionally low borrowing costs.
“The result is that the majority of properties in Australia are cheaper to buy than rent at current prices.”
Financial Planner Cameron Howlett said over the last six months there has been a significant jump in enquiries from people wanting to invest in shares as a means of boosting their home deposit savings.
“They have realised that the $40,000 deposit, $100,000 deposit, or even the $200,000 deposit that they’ve saved isn’t enough for them to be able to get into the market without them having to pay lenders mortgage insurance,” he said.
“So they’re getting frustrated because it is incredibly difficult to get in unless there is a bit of support from the bank of Mum and Dad.”
It takes a decade to save a 20 per cent deposit for an average home, compared to six years in the early 1990s, according to the Grattan Institute.
Mr Howlett said renters tempted to shelve the idea of home ownership in favour of equities should consider the long-term consequences of their decision.
The longer you delay your entry into the property market, the more difficult it can be in an environment where interest rates are at record lows and property prices continue to rise.
“You don’t want people getting to retirement and not having a roof over their head,” Mr Howlett said.
If you are struggling to get a deposit together for a metropolitan home, you could consider buying into a regional area with good public transport connections to your closest city, given working from home – at least for part of the week – has become more accepted in workplaces.
Moving back in with your parents to save on rent, paying into a separate savings account and shopping around for better deals on significant expenses like health and car insurances can all boost your savings.
To keep your spending in check, you can use money tracking mobile phone apps like MoneyBrilliant or Goodbudget, and turn saving into a game by challenging your partner or friends to no-spend competitions.