Property prices soar: how long will it take to save a deposit in your capital city?

Property prices across Australia have shown significant signs of recovery from the impacts of Covid-19. So how much does a first home buyer need to save on average to afford a deposit in their city?

The latest CoreLogic figures showed that national property prices in February grew at the fastest record in 17 years (2.1 per cent).

Head of Research at CoreLogic, Tim Lawless, said: “The last time we saw a sustained period where every capital city and rest of state region was rising in value was mid-2009 through to early 2010, as post-GFC stimulus fuelled buyer demand.”

Further, the latest research from Commonwealth Bank’s Household Spending Intentions (HSI) series shows that home buying intentions have continued to grow in February, recording its highest level since the start of the HSI in 2015.

And for the week ending 14 March, Corelogic’s auction data recorded an average auction clearance rate of 80 per cent across the country, with 2,218 homes taken to auction. Sydney recorded its sixth consecutive week with clearance rates above 80 per cent, with 84.3 per cent clearance achieved.

These figures help highlight the strong appetite Aussie would-be buyers have for property at the moment.

But with savings account rates at record lows, first home buyers may feel further locked out of the market. However, not all hope is lost if we take a look at exactly how long it may take to save up a deposit in each capital city.

As long as first home buyers are able to scrimp and save, it actually may be closer than they think.

How long it takes to save a deposit in each capital city in Australia

RateCity research has crunched the numbers on how long it may take to save a deposit in your capital city, based off of current CoreLogic median dwelling prices.

Time taken to save for a deposit in each capital city

Source: RateCity.com.au, CoreLogic.com.au, Genworth LMI Premium Estimator, Revenue NSW Calculator, SRO VIC Land Transfer Duty, QLD Govt Transfer Duty Estimator, Revenue SA Calculator, OSR WA Transfer Duty Calculator, SRO TAS Property Transfer Duty Calculator, NT Govt Conveyance Calculator, Revenue ACT Calculator.

Notes: Median dwelling price based on CoreLogic figures for February 2021. Stamp Duty and LMI figures based on first home buyer owner occupier. Savings account rate based on current average on RateCity database of 0.35 per cent, hypothetical calculation in which rates will not change over time. Data accurate as of 18.03.2021.

While a 20 per cent deposit may be considered more ideal by lenders, it can be a challenging amount to save for any first home buyer. These figures are based on how long it may take to save for a 10 per cent deposit based in each capital city and includes stamp duty and lender’s mortgage insurance as upfront costs.

As it stands, if you were only able to save $200 a week towards a deposit, it would take you over ten years to save in Sydney and Melbourne. However, if you were able to boost those savings to $400 a week, you may be able to save a deposit in only 5 – 6 years.

However, if you’re saving $400 a week in all other capitals, building up a 10 per cent deposit may only take as little as 3 – 4 years.

If you’re a first home buyer feeling as if getting a foot on the property ladder is out of your reach, there’s a few key things to keep in mind about these results:

1. You don’t have to aim for a median-priced dwelling. Consider saving up for something more affordable in your city to begin with, or even look to regional areas for your first property.
2. Put any windfalls into your savings when you get them, whether from a generous tax return or a gift from a family member. Don’t underestimate compound interest. Adding to your savings as frequently as possible may help you achieve your goals faster.
3. Take advantage of government assistance, including First Home Owner Grants and even the First Home Loan Deposit Scheme, if this is applicable to your financial situation.
4. Lender’s mortgage insurance doesn’t have to be an ‘upfront’ cost. Unlike stamp duty, you don’t always necessarily have to pay costly lender’s mortgage insurance (LMI) upfront when you sign for your new home. Many homeowners add the cost of LMI on to their mortgages. But keep in mind that this will increase the value of your loan and in turn see you paying more in interest over time. Consider speaking to a broker for more information.

First home buyer home loans

While the appetite for property may be growing as quickly as housing prices, home loan interest rates are moving in the opposite direction. First home buyers looking for mortgage approval are entering the market in one of the lowest rate periods in history.

This is why it may be invaluable to shop around before just applying for a mortgage with the bank you’ve been with since childhood, lest you be stung with a ‘loyalty tax’.

Here are some competitive home loan options on the RateCity database for first home buyers:

Compare home loans in Australia