Saving a home deposit in Sydney and Melbourne is impossible - so have smashed avo instead

Wednesday 19 October 2016

Article by Mozo

With debate raging on about whether millennials are trading a home loan deposit for avocado on toast, an analysis by Mozo has shown that home buying hopefuls might as well have their fancy breakfast - because saving for a 10% deposit in the Sydney or Melbourne markets is practically impossible.

Saving a home deposit in Sydney and Melbourne is impossible - so have smashed avo instead

The analysis showed that if housing prices continued to rise at the same rate they have been in the last decade, a first home buyer managing to save 10% of their income each month will never save up a 10% deposit on a Sydney or Melbourne home.

Mozo Director Kirsty Lamont said that millennials are struggling to get a steady foot on the property ladder because property prices are simply rising too quickly while income levels remain flat.

“The reality is that incomes just haven’t kept up with the explosion in property prices and the property market is slipping further and further out of the reach of first home buyers across the country, even if they’re prepared to make their own avocado on toast in their tiny rental kitchenettes,” she said.

The analysis looked at median home prices in each Australian capital city, and found that while Sydney and Melbourne dwellers would never save a 10% deposit, those in Canberra, Darwin, Brisbane, Perth and Adelaide would take over 8 years, while home buyers in Hobart have it best, taking just 5 years and 3 months to save a deposit.

How long will it take to save a deposit?

CityCurrent median dwelling priceMonthly income after taxSaving 10% of income per month10% deposit20% deposit
Sydney$1,031,370$5,078$508NeverNever
Melbourne$843,230$4,833$483NeverNever
Brisbane$526,720$4,849$4858 years, 10 months20 years, 2 months
Adelaide$479,490$4,720$4728 years, 2 months18 years, 7 months
Perth$565,650$5,494$5498 years, 0 months17 years, 2 months
Hobart$358,160$4,493$4495 years, 3 months10 years, 6 months
Darwin$477,180$5,154$5159 years, 1 months39 years, 6 months
Canberra$671,950$5,565$55710 years, 3 months23 years, 9 months

The situation was even harder for first home buyers shooting for a 20% deposit, which Mozo’s experts recommend having, in order to avoid paying lenders’ mortgage insurance. A 20% deposit was, unsurprisingly, impossible in Sydney and Melbourne, and would take nearly 40 years in Darwin, or close to 24 in Canberra.

“First home buyers have a stark choice between trying to save more, which is very difficult in the cities with the strongest growth in house prices as rents tend to be higher, or to aim for a smaller deposit which means higher mortgage repayments and the added hit of lenders mortgage insurance,” Lamont said.

“Renting for life may be the only option for young Aussies priced out of the market who don’t have financial backing from their parents, inheritance money or a partner to help share the burden.”

If you’re looking for a home loan that will work with your circumstances - whether you’re saving for a 5%, 10% or 20% deposit - check out our home loans table to compare mortgages side by side and see what’s out there.

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