ISCOVER
Saving for a deposit takes first home buyers more than eight years on average, according to new data.
The price of entry-level homes is growing faster than premium ones in most capitals, putting pressure on already-squeezed first home buyers and shrinking the pool of affordable housing, according to Domain research.
The property research and listings firm found that lower-priced homes have outperformed premium properties in price growth since 2022 in most cities. The trend is most stark in Perth, Brisbane, and Adelaide, which have experienced a sharp rise in prices.
Saving for a deposit has become the toughest challenge for first home buyers, now taking more than eight years on average, up from six years in the early 2000s.
Since 2020, mortgage costs have surged, as high prices rise and serviceability buffers increase, and now stand at their highest level in decades.
Mortgage repayments have risen to take up 54 per cent of household income, a 20-year high, Domain research showed.
Affordability pressures on prospective first-time buyers are increasingly obvious, with home ownership rates dropping across all age groups, especially for those under 34 years.
At the same time, the tax burden for home owners has increased over time. This is partly because stamp duty brackets remained largely unchanged in many states until 2019. As property values rose significantly over the same period, more buyers were pushed into higher tax brackets, increasing their overall tax burden. In turn, this has added to the time it takes aspiring home buyers to save for a purchase and enter the market.
Commenting on the trend, Nicola Powell, chief of research and economics at Domain, said: “Nationally, over 68 per cent of the population born between 1947-51 owned a home by the age of 30-34. Today only 50 per cent of those aged 30-34 own a home.
“In New South Wales, the difference is even starker at only 45 per cent.
“More needs to be done to tackle this crisis in home ownership. A shift from stamp duty to a land tax should be the immediate first step – this would remove a major barrier for prospective buyers.”
Housing affordability for first home buyers sits at its lowest since at least 1995, as house prices continue to climb to record highs.
Despite the expansion of the Home Guarantee Scheme, expected to support first-time buyers and cut the time needed to save for a deposit, an increasing number are considering investment properties over owner-occupied homes, or ‘rentvesting’, as their entry point into the property market to overcome affordability challenges.
Soaring property prices are also pushing lenders to adapt. Last week, Great Southern Bank became the latest non-major to roll out a variable-rate mortgage with terms of up to 40 years.
[Related: Affordability for first home buyers falls to record low]
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