Domain’s First Home Buyer Report found the time it takes for couples ages 25 to 34 to save for a 20% deposit on an entry-level home dropped by two months and by one month for entry-level units. 

Ideally, 20% of the full value of the home is a good amount to save for a deposit as it saves you time from paying off your home loan and from taking out a Lenders Mortgage Insurance (LMI), which essentially protects lenders in the event you are unable to meet your repayments. 

Across the combined capitals, three months were shaved off from the saving timeline for houses and one month for units. 

Aspiring homeowners are now breaking into Sydney’s property market a month earlier compared to the year prior. 

Sydney currently reigns as the city with the longest time to save for house and unit deposits, at six years and eight months and four years and six months, respectively.

Keep in mind, this is for an 'entry level' home - Sydney's median house price sits near the $1.6 million mark.

Despite the strong home price growth in Melbourne, saving for a house deposit is also now three months shorter for first-time homebuyers. Saving for a deposit on a unit is also one month faster than last year. 

Homebuyers will also need less time to save for a house deposit in Canberra, Hobart, and Darwin; however, an extra month is needed to build a 20% deposit for an entry unit in Canberra.  

Time to save for a 20% deposit on an entry-level house

Data source: Domain

However, not all cities posted declines in deposit saving timelines. 

Higher savings rates and wage growth were not able to outpace the double-digit price growth of properties in Brisbane, Adelaide, and Perth, where first home buyers will need more time to save for a lump-sum deposit.  

Time to save for a 20% deposit on an entry-level unit

Data source: Domain

High cash rate: A double-edged sword

“In this report, we discovered that, due to higher interest rates, there has been a slight reduction in the time required to save a deposit for those who can consistently save and have experienced wage growth,” said Dr Nicola Powell, Domain’s chief of research and economics. 

The cash rate, which has remained at its current peak of 4.35% since November 2023, directly impacts the interest rate that applies to savings accounts. 

Rate hikes translate to improved returns, which is good for individuals parking their money in savings accounts. 

But what is favourable for depositors can hurt borrowers including mortgage holders. It’s basically a double-edged sword.

“A higher cash rate has a dual effect on first home buyers,” said Dr Powell.

“On one hand, it may shorten the time needed to save for a deposit through better savings rates. Conversely, it makes home loan repayments significantly more challenging as the interest accrued on debt is larger.”

Most cities fall into ‘mortgage stress’

The very reason that accelerates the deposit saving timeline of many first home buyers is also leading many Aussies to fall into mortgage stress. 

Much like rental stress, mortgage stress occurs when an individual spends more than 30% of their gross income to cover their home loan repayments. 

To avoid mortgage stress, homeowners are recommended to dedicate less than 30% of their income towards mortgage repayments. But this simply is not the case across combined capitals. 

Domain found mortgage affordability is stretched in cities, with entry-level houses requiring 46.5% of income and entry-level units 30.7%. 

“The stretched mortgage serviceability highlights the dual effect of high cash rates on first home buyers,” Dr Powell said. 

“While there has been a slight reduction in the time required to save a deposit (for those who can consistently save and have experienced wage growth), the higher interest rates are also making home loan repayments more difficult, which is why more people are facing mortgage stress.”

Homeowners holding mortgages in Sydney (57.2%), Canberra (48.3%), Melbourne (45.4%), Brisbane (42.7%), Adelaide (42.1%), and Hobart (40.3%) are effectively under mortgage stress. 

Perth slightly exceeds the threshold at 31.2%. Darwin offers the lightest burden, taking 29.2% of a couple’s income.  

For entry-level units, Darwin (18.3%), Perth (19.3%), Adelaide (28.1%), and Canberra (29.3%) fall below the mortgage stress benchmark. Melbourne and Brisbane sit just above 30%, while Sydney takes 37% of income. 

What does all of this mean for first home buyers?

Though the time to save for a home deposit has accelerated, it doesn’t mean homeownership has become easier for all, especially those who don’t have access to the bank of mum and dad. 

“The time to save, mortgage serviceability, and record high property prices explains the growing reliance of some first home buyers on financial support from the bank of mum and dad to secure a deposit,” Dr Powell noted. 

Ultimately, the property research expert said the report’s findings only highlighted the need for government action to address Australia’s housing undersupply “to ensure adequate, affordable housing”.

“While initiatives like the Help to Buy scheme offer promising solutions, tackling housing undersupply in the long term requires concerted efforts from our government," she said.

Read more: Home Loans News First Home Buyer Buying a home

Bernadette Lunas

Finance Journalist

Bernadette is a journalist with years of experience covering topics in macroeconomics, real estate, and lifestyle beats for notable print media organisations. She joined the InfoChoice Group in 2024, bringing her passion for writing stories that help Australians make better decisions about money.

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