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Recent research has revealed that in the ’90s it took from just a few months to a year to save a deposit for the majority of home buyers – five times less than it’s expected to take today.
The third HomeStart Finance first home buyer index found that 33 per cent of South Australian first home buyers expect it to take more than five years to save a home deposit, while 23 per cent expect it to take between 3-5 years. Only 17 per cent of the respondents believed it would take about a year.
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The research also revealed that prior to year 2000, it took from just a few months to a year for the majority of home buyers to save a deposit.
HomeStart chief executive officer John Oliver explained that there are a range of factors making saving for a deposit more difficult for today’s home buyers, namely stamp duty and tighter lending conditions.
“Something we’ve seen emerge since the global financial crisis are tighter lending conditions as financial institutions seek to lessen their exposure to risk,” he said.
“Many mainstream lenders today require a 20 per cent deposit from home buyers, which can be reduced by taking lenders’ mortgage insurance in most cases, but that in itself can add many thousands of dollars to the home loan.
“A 20 per cent deposit on a $400,000 home means a first home buyer would have to save $80,000 upfront, as well as meeting other fees and charges such as stamp duty. That’s a significant amount of money for a young person on a moderate income.”
Mr Oliver added that cost of living pressures have also made it difficult for young home buyers to save for a deposit, particularly in South Australia, with the first home buyer index indicating that almost 80 per cent of first home buyers expect the cost of living to worsen in the next 12 months.
“In South Australia, we have some of the highest utility prices in the country, and coupled with others costs such as rent and general living expenses, it can make it very difficult to save money for someone on a moderate income,” Mr Oliver elaborated.
“It may be the reason we’re seeing an increasing trend of young people moving back in with their parents in order to save money.”
[Related: FHB numbers fall by 6.7%: report]
