Nila Sweeney Nov 26, 2021

The time it takes to save a house deposit has blown out to a record 10.8 years Australia-wide as prices increase at a rate 8.1 per cent faster than household income, the ANZ CoreLogic Housing Affordability report shows.

Home buyers on an average income now need to use 39.3 per cent of their household income to service a new mortgage after house prices rose 24.2 per cent nationwide over the past year.

Home buyers in Sydney are now taking 16.6 years to save a 20 per cent deposit to buy a house – also a record, following a 30.4 per cent rise in prices over the past 12 months.

New homeowners then need to spend 60.4 per cent of their household income to repay their mortgage, which is also a record high.

First home buyers in Melbourne were no better off. With house values rising 10.5 times faster than income, home buyers need to spend more than half (50.8 per cent) of their household income to service their new home loan.

It will take buyers 14 years to save the 20 per cent deposit, but first home buyers Brianne Keogh and Angus Mills are not waiting.

Determined to break into the housing market sooner rather than later, the couple took drastic steps to come up with a deposit and compromised on the location and type of property they were after.

“We had to make a lot of sacrifices including moving back home with my parents and forgoing holidays and going out on weekends to save faster,” Ms Keogh said.

“We wanted to buy closer to the city and get an existing home that we can renovate, but that would have taken us so much longer to save the deposit, and we’re not prepared to wait.

“So we decided to buy a house and land package in Doreen in Melbourne’s outer ring. It took us more than three years of fiercely cutting down on expenses to save the 5 per cent deposit we needed.”

ANZ senior economist Felicity Emmett said the pandemic and some government housing policies had exacerbated the situation.

“We’re now in a situation where the gap between those who’ve already achieved homeownership and those who haven’t has really widened, and I think for many people, they will never be able to bridge that gap,” Ms Emmett said.

“This is a situation that’s been getting more and more difficult over the past 20 years or so and, with the large increases in home prices over the past year, it makes housing very inaccessible.

“We already have cases in Sydney, and probably in Melbourne too, where essential workers can’t find affordable housing near where they work.”

Ms Emmett said affordability could worsen further in the year ahead as prices continue to rise, albeit at a slower pace.

“The main issue is that house prices have been growing so much faster than incomes – now 12.5 times the average household income in Sydney,” she said.

“Even with sharp moderation in growth, we’re still going to see a 6 per cent rise in home prices next year.

“It’s unlikely that household incomes are going to rise by the same amount as wage growth is still stuck in the low 2 per cent [region]. So, we really need house prices to grow at a slower pace than household income for an extended period to improve some of these affordability measures.”

Eliza Owen, CoreLogic Australia head of research, said even with house price growth slowing, affordability remained a challenge.

“If house prices slow, then affordability won’t deteriorate as rapidly, but even if property prices drop by 10 per cent or 20 per cent or something really dramatic, it doesn’t make that much of a dent for people who have seen relatively low-income growth and whose employment has been disrupted by COVID-19 as well,” she said.

“At the same time, when we start to move into the downswing, this is likely to be off the back of higher interest rates. And so we will probably see a greater jump in the portion of income required to service a mortgage, which will also worsen affordability.”

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