If at first you don’t succeed . . . save, save save!

27/11/2015   Nicholas Siemensma, Paraplanner and Shane Light, Head of Advice/Senior Financial Planner

First home buyers are currently up against the odds as it becomes harder and harder to enter the housing market.

In spite of recent interest rate decreases, it is the task of saving up the deposit that is having the biggest impact on new buyers. With house prices in Sydney going up over 40 per cent in the past three years, and Melbourne being not far behind, this isn’t surprising.

Let’s compare just how much harder it is for current buyers to save up a 20 per cent deposit compared to previous generations.

The graph below outlines how long it takes a buyer to save a 20 per cent deposit, assuming an average disposable income and that 15 per cent of the deposit has already been saved.

Savings Graph First Home Buyers

Source: ABS, Residex, ANZ Research

The steep increase that can be seen in the last three years is having drastic effects on how long it takes to save up a deposit, translating to a near-record 9.2 years to save a deposit for the average home in Sydney, and over eight years in Melbourne. This coupled with the Federal Government abolishing first home saver accounts, effective 1 July 2015, has not made things easier for those starting out.

However, despite these hurdles, hope remains that respite is on its way. There are hints of the property market easing with auction clearing rates decreasing. Banks are also recognising the difficulties first home buyers are by generally offering better deals to owner-occupiers than investors. A tightening on lending standards for those applying for investment loans has also been made in response to regulator’s concerns over the recent growth in investor lending.

It’s important that first home buyers get started saving early, and look out in the marketplace for the best options. High interest savings accounts are a great idea, as they offer higher interest rates than other accounts. In some cases you may also be able to boost your interest earning power by making regular contributions to your savings without withdrawing funds from the account, which makes it a perfect way to start saving for a deposit.

No one knows what the future holds but hopefully we have reached the property peak, and moving forward first home buyers will be in a better position. So remember to get saving, and good luck to all the young singles and couples out there trying to get their foot in the door.

If you would like to find out more about how you can break into the property market as a first home buyer, or need help with identifying you savings strategy to make a deposit on your first home, please don’t hesitate to contact us on 1300 726 082 and ask to speak with an adviser today.


Dislaimer: Shane Light is an Authorised Representative and John Hopkins Financial Services Pty Ltd is a Corporate Representative of WealthSure Financial Services Pty Ltd Level 1 190 Stirling Street PERTH WA 6000 ACN:130 288 578 AFSL: 326450. 

General Advice Warning: This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial advice prior to acting on this information.

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