Saving for a home deposit? How to get your foot in the door sooner

Buying a property in Australia’s biggest cities could seem like a distant dream for many young people, but it might not actually be as unachievable as expected.

A new survey commissioned by ING found that 32 per cent of millennial first home buyers believe saving for a deposit will take them at least 10 years.

But 69 per cent of homeowners aged 39 or younger indicated it took them no more than five years.

According to RateCity data, the time it would take to save for a deposit would depend on how much and how fast you’re saving.

Consider someone saving a 10 per cent deposit ($79,551) for a median-priced Sydney home ($790,072), plus stamp duty of $30,987. If they put aside $200 a week, it could take more than 9.5 years to come up with the deposit. Not too far off from the 10 years projected by millennials in the ING survey.

But if they were to increase the amount they’re allocating to $400 a week, they could shave off nearly half the time, needing only five years to build up the deposit.

As Melbourne property prices are lower, it’s no surprise that it is faster to come up with a deposit here.

If someone is stashing away $200 a week, it could take about 8.5 years, but if they bump up their weekly allocation to $400, it could potentially take less than 4.5 years.

This is assuming lender’s mortgage insurance (LMI), which is required for deposits of 20 per cent or smaller, is not paid upfront and incorporated into the mortgage and paid with interest over time.

Time taken to save for a deposit

Source: RateCity.com.au, CoreLogic Hedonic Home Value Index August 2019 Results, State Revenue NSW, State Revenue VIC

Note: Table does not factor in Lenders Mortgage Insurance (LMI). If you are a first home buyer, you may be exempt from or qualify for stamp/transfer duty.

The ING research also showed 26 per cent of surveyed millennials have made the leap into the housing market, thanks to Australia’s low interest rate environment, while 58 per cent are already seeking their next property. Half are saving to make their first purchase.

Just more than half (55 per cent) of those who have bought a property said they compromised on what they wanted in a home to enter the housing market sooner.

But many of those yet to buy are reluctant to do the same, with only 38 per cent of them indicating they would not mind rethinking the type of home and location to buy a home sooner.

In fact, the location is the feature of the home most people (36 per cent) are willing to compromise and 21 per cent wouldn’t mind forgoing storage space.

While more than half (54 per cent) of millennials believe it is important to own a property, most young people (40 per cent) today rent their home and 37 per cent own their own home. One fifth (20 per cent) live in their parents’ home.

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