How Long Does It Take First Home Buyers To Save A Deposit In Today's Market?
In This Weeks How's The Market | Edition 39
How Long Does It Take First Home Buyers To Save A Deposit In Today's Market?
Not All Areas Are The Same
Melbourne Has 8th Highest House Prices In The World Relative To Income
How Long Does It Take First Home Buyers To Save A Deposit In Today’s Market?
As house prices have dropped over the past 10 months, first-home buyers are needing to save less money to get into their first property. Though whilst this is the case, they now need to contend with higher interest rates causing higher mortgage repayments which are often outweighing any benefits that falling house prices have caused.
According to the First Home Buyer Report released by Domain on Tuesday, a couple in Melbourne earning an average wage would have to allocate 42.1 per cent of their combined income to cover the repayment of a loan on a $660,000 entry-level house that they purchased.
This is much higher than last year's report, which recorded 28.2% of income being spent on mortgage repayments, but this year's report shows that if you're spending over 30%, you might not even qualify for a loan that big due to mortgage stress which is calculated at a threshold of 30% or over.
If you bought an entry-level unit for $412,566, you're slightly better off with 26.3% of your income going towards mortgage repayments, even though it's increased from 18.9% last year.
For couples looking to save up for a house in Melbourne - the time it would take to do so has dropped by 11 months compared to last April. It now takes an average of 5 years and 7 months, instead of 6 years and 6 months. The time to save up for an entry-level unit has also decreased by 9 months during the same period.
However, the biggest reductions in savings time were observed in the pricier parts of the city. This has been very apparent for us on the ground as the wealthier pockets also tend to see parents supporting their children with gifts of cash or guarantors to help get their kids into the market sooner.
What The Agents Are Saying
It’s important to remember that every market moves at different speeds. This can be defined as regional vs inner city, house vs unit, east vs west or even suburb by suburb as it’s common to see the more desirable suburb moving faster compared to the less affluent suburb next door.
This was definitely apparent this week as I spoke with agents from the southeast as well as agents inner city.
Inner city agents seemed worried this week, with very limited stock in the pipeline for Apr and less than average stock scheduled for May, which is usually the busier month as things slow down over Easter and the school holidays.
Meanwhile, some agents in the southeastern corridor have reported a spike in listings stating things are finally picking up for them again with multiple agencies booking an average amount of listings for the same period.
One thing that is still common across agencies is that buyers are still out in numbers, even if not all buyers are serious and they have some tyre kickers, there are still more than enough buyers to keep properties moving fast.
The Wow Factor!
3520 Point Nepean Road, Sorrento
The truest definition of a sunroom. Great design!
And not a bad tasting room.
In The Media
According to this article, house prices relative to income are higher in Melbourne than they are in London & New York - an interesting perspective.
It also shows how far house values have come. Though considering this is our track record, it makes me believe that house prices are even more likely to only continue growing.
Final Thoughts
Whilst house prices have dropped and the amount first home buyers then need for deposits has dropped as well, I can’t see any short-term relief as buyer demand is still so high relative to stock levels.
I suspect over the next 8-weeks that we will house prices begin to rise and sentiment increase.
Thanks for reading this far!
We value feedback and if you have any suggestions on what you would like covered in the future please email me at tristan@tomii.com.au
Happy Buying!
Note: This is my opinion, please seek your own expert advice when making decisions.
