A survey by homebuyer sentiment found that consumers’ capacity to save for down payments has been negatively affected by inflation.
The consumer price index increased 3.8% in the twelve months leading up to the June quarter and 1% in the month of June alone, according to ABS statistics. The housing market has the largest quarterly increase in prices in June 2024.
So the cost of living pressure has now become the most cited barrier to homeownership.
This has surpassed the other primary obstacles identified in 2023, such as housing affordability (43%) and the challenge of locating a suitable property within budget constraints in an appropriate area (42%).
First home buyers’ (FHBs’) ability to save has been hampered by cost-of-living pressures; 24% of them save less than 10% of their take-home salary.
Because they take longer to save a deposit for a house, one-fifth of them save 20% or less of their income. 25% of purchasers of real estate have been saving for three to five years, while 17% have been saving for more than five years.
The report illustrates a case study of a household comprising two median wage earners to underscore the difficulties encountered by prospective home buyers in accumulating savings for a home purchase. For a couple earning $65,000 each, saving 20% of their take-home pay would result in nearly 14 years to gather a 20% deposit for a median-priced house in Sydney, while an apartment would require about eight years.
Currently, in Melbourne or Brisbane, the time required to accumulate a deposit for a house is approximately nine years, while for an apartment, it is around six years.
The percentage of first home buyers who think they are likely to save a complete 20% deposit has decreased to 15%, down from 20% last year and 34% in 2020.
The report indicates that a significant number of first home buyers appear to be shifting their focus away from the objective of accumulating a 20% deposit. In contrast, over one-third (36%) are targeting savings of 10% to 14% of the purchase price.
Also, three out of ten FHBs have saved less than two months’ worth of income. Because of this, they are worried about what might happen if interest rates keep going up.
More than half of FHBs (55%) think it would be hard for them to make future mortgage payments if rates went up by 1% over six months.
House prices are going up by 8.8% across Australia, and apartment prices are going up by 6.5%. This means that housing is becoming less affordable in many areas of the country. This rise has been especially strong in Perth, Adelaide, and Brisbane, making it harder and harder for FHBs to get into the market.
Sydney continues to have the highest median house price of any capital city, at $1.47 million.
Melbourne has always trailed closely, but with recent price increases, Brisbane has closed the difference.
At now, the median property prices in Melbourne and Brisbane are $929,715 and just over $966,382, respectively.
At $859,050, Sydney also has the highest median price for flats and apartments, followed by Melbourne at $610,652, Brisbane at $653,325 and Sydney at $859,050.
Affordability issues in the present climate are forcing home buyers to make a number of modifications in order to obtain a house; seven out of ten questioned said they are now examining homes in various places, such the outer suburbs.
This year, 40% of home buyers are now considering interstate options, an increase from 34% in 2023. The report indicated that the attractiveness of regional Australia may be diminishing as prices nationwide continue to escalate, leading to a reduction in the price disparity between capital cities and interstate regions.
At the same time, first home buyers are considering alternatives to traditional houses in response to affordability challenges, with a significant portion opting for apartments (64%) or smaller properties (70%).
“Even with this flexibility, housing affordability continues to be a major barrier to home ownership, as the increasing cost of living further intensifies this issue in the present economic environment,” the report indicated.
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