First-home buyer? The states where you can save a deposit the quickest

PropTrack’s latest Housing Affordability Index, published this week, found prospective homeowners in Western Australia take an average of 3.8 years to save a deposit – less time than in any other part of the country.

Queenslanders take 5.4 years on average to save enough money to get on the property ladder, making the sunshine state the second most attractive option for prospective buyers on a deadline.

An average income household would need to save 20% of their income for more than five and a half years to save a 20% deposit on a median priced home, the index shows, with housing affordability having declined to its worst level on record.

PropTrack senior economist Paul Ryan said first-home buyers are facing incredibly stretched affordability thanks to increasing prices and high mortgage rates.

“Over the past year, mortgage rates hit their highest level since 2011 and this has had a drastic impact on housing affordability, reducing borrowing capacities by as much as 30% for new borrowers,” he said.

PropTrack senior economist Paul Ryan says lack of affordability for first-home buyers is at an all time high.

“National home prices rose for the 20^th consecutive month in August to be 6.6% higher over the 2023/24 financial year, the equivalent to around a $50,000 increase of the national median price.”

The index shows the state where it takes the longest to save a New South Wales, with 6.5 years of saving needed. South Australia came in close behind, recording 6.3 years as the expected saving time.

Meanwhile, it takes an average of six years to save for a first home in both Tasmania and Victoria.

Saving for a deposit remains a barrier for many property seekers who are also balancing paying rent with rising costs, even for those first-home buyers who can afford to make mortgage repayments on their first home.  

Sydney-based Mortgage Choice broker Ashley Bieser said first-home buyers wanting to get on the property ladder sooner can always consider alternative options like using a government grant or paying Lenders’ Mortgage Insurance (LMI).

“It's worth speaking with a mortgage broker to understand your eligibility for the schemes and see which ones you could take advantage of,” she said.

The First Home Owners’ Grant – a one-off $10,000 payment from the federal or state government – is a strong option for many savers hoping to buy their first home, while states and territories also have their own first-home buyer schemes and concessions for situations like buying rurally, building or purchasing a property alone.

 “There is also the Home Guarantee Scheme where the government will cover the LMI premium,” Ms Bieser said. “LMI is a risk fee paid by you to the lender, and can be added on to your loan amount.”

While price caps and income restrictions apply in the case of most schemes and also vary state to state, prospective buyers can snag a deal by considering options like the Super Saver Scheme or utilising a guarantor arrangement.

“If you've been voluntarily contributing extra money into your superannuation account, you can actually pull this back out to use as cash to purchase your first home,” Ms Bieser said. “There are restrictions on how much extra you can put into your super each year and then ultimately, how much you can take out, but that's an additional way of saving in the interim.

“You could also receive a cash gift from your parents, which ideally would reduce the loan-to-value ratio, or use your parents with a property that they own as a security guarantor on your application.”

Using a guarantor allows a prospective buyer to reduce the overall lending ratio to 80% so they bypass the need for LMI. However, applicants still need to afford the full loan amount and the use of a parent as a guarantor hinges on their specific financial situation.

“Parents would need to obtain independent legal advice so that they understand their rights and obligations,” Ms Bieser said.

People in certain occupations can also access LMI waivers, significantly reducing the amount of time generally spent saving a deposit.

“If the applicant was a medical practitioner or optometrist or a chartered accountant or a solicitor, that lender will often waive the LMI,” Ms Bieser explained. “It is for specific occupations, and then that falls with specific lenders, but it can be a good option.”

People hoping to get on the ladder can also consider getting in the door sooner by purchasing property in a different area to where they had initially planned.

“There is what everyone calls ‘rentvesting’ – continuing to rent where you want to live, and then buying a property and renting that out to somebody else,” Ms Bieser said. “It might allow you to get in the door a bit sooner where you are purchasing in your state.”