Saving for a deposit is becoming increasingly challenging for first-time homebuyers in Australia, with the latest ANZ CoreLogic Housing Affordability report indicating that it now takes over 10 years to save a 20% deposit. According to the report, if households save 15% of their gross annual income, it would take them approximately 10.8 years to accumulate enough for a house deposit and nine years for a unit.
The report evaluates housing affordability across Australia using various metrics. It highlights that property prices surged by 21.6% over the year leading up to October 2021. Senior ANZ Economist Felicity Emmett noted that while indicators such as home values relative to income and the deposit requirement have risen significantly, mortgage serviceability has been less affected due to low borrowing rates.
“The number of loans taken out by first home buyers fell 27 per cent between January and September 2021 as housing values increased at a much faster pace than household incomes,” Emmett said.
Inner-city apartments offer some of the best opportunities for tenants and buyers, whereas regional Australia has seen decreased affordability due to increased migration driven by the pandemic and flexible working arrangements. Regional property values rose more sharply than those in capital cities, increasing by 18.1% from March 2020 to June 2021 compared to an 11.2% rise in combined capital cities.
Renting in regional areas has become less affordable, with rent requiring a record high portion of income at 32.7% in June 2021 compared to 28.2% in capital cities. Consequently, there are more regions where servicing a mortgage is cheaper than renting.
“As borders reopen and workers return to the city, we can expect to see some of these regional affordability constraints start to ease,” Emmett added. “However many challenges will remain, especially for those looking to enter the market, with significantly higher deposits, a tightening of lending restrictions, and higher mortgage rates all features of the 2022 housing market.”
Key findings from the report include:
- The portion of income needed to service a new mortgage on a median dwelling value was at its highest since March 2012.
- Sydney remains Australia's most expensive capital city market with an estimated cost of servicing a new mortgage on median dwelling value at 49.1%.
- Melbourne is considered Australia's most affordable city for renting relative to household income.
- Darwin, Perth, and Brisbane are identified as Australia's most affordable cities for entering the housing market.
- National dwelling value-to-income ratio reached a record high of 7.7 during June quarter 2021.
- Australian housing values rose by 12.6% between March 2020 and June 2021 while median household incomes slightly declined.
- Rent on median dwellings accounts for the highest portion of household income recorded.
For further insights into specific locations or state-based information regarding buying versus renting costs, additional resources are available.