12 Oct 2020

Brisbane first-home buyers need 4.5 years to save, despite pandemic

Low interest rates, falling prices and less smashed avo on toast have mixed a prime purchasing cocktail for Brisbane’s first-home buyers who are now taking less time to save for a unit compared to this time last year.

New research from Domain has revealed that despite the COVID-19 pandemic, entry-level home hunters have shaved two months off the time needed to save the average deposit before climbing their initial steps on the unit property ladder, with real estate experts citing an enticing blend of government grants, forced financial good behaviour and the still-competitive unit market as key drivers.

According to figures released in the latest Domain First-Home Buyers Report on Thursday, it’s now taking just three years and three months for the average couple to bank a 20 per cent deposit for a unit, which is two months faster than September 2019, and a whopping seven months quicker than half a decade ago.

Time to save a deposit, entry-level units

City

Entry price

20% deposit

Time to save

Annual change, months

5-year change, months

Sydney

$585,000

$117,000

5 years 7 months

1

-5

Melbourne

$424,500

$84,900

4 years 3 months

1

-1

Brisbane

$328,000

$65,600

3 years 3 months

-2

-7

Adelaide

$285,000

$57,000

3 years

0

2

Perth

$257,000

$51,400

2 years 5 months

-1

-6

Hobart

$320,000

$64,000

3 years 6 months

1

12

Darwin

$200,000

$40,000

1 years 8 months

-2

-22

Canberra

$370,000

$74,000

3 years 4 months

0

-1

Source: Domain

In Sydney, it takes the average first-home buyer six years and six months to save for a 20 per cent deposit on an entry-level abode.

The research assumes a couple on average earnings for a 25-34-year-old in their city can save 20 per cent of their post-tax income every month, deposited in a standard online savings account. It excludes transactional costs of buying property.

Entry-level homes are based on the 25th percentile, or the cheapest quarter of homes for sale.

In Brisbane, this means a budget of $450,000 for a house, for which a 20 per cent deposit would be $90,000.

But while the Domain report painted prime conditions for Brisbane’s first-home buyers in the unit sector, the average saving time climbed slightly for those purchasing a house (now four and a half years compared to a month less last year), with experts also warning the good times could soon end as stock levels tighten.

Domain senior research analyst Dr Nicola Powell said while the figures highlighted the city’s long-suffering unit sector, a decline in new builds and developments could spark a new trend in coming months.

“Deteriorating unit prices have really helped to fast-track that journey to first-home ownership … but I do think that construction cycle is coming to an end, so I wonder if we are also at the end of these falling prices,” she said.

“So it will be interesting to see what does unravel.

“I also think many first-home buyers are seizing this [current] opportunity to gain market access.

“There are so many things in place to entice them such as low interest rates and a number of grants … there’s the federal super scheme and the federal deposit scheme which guarantees a 5 per cent deposit, so that has super-charged that journey.”

While the Domain report revealed a two-month time drop across Greater Brisbane, the data further unearthed the city’s hottest spot for first-home buyers, with Cleveland-Stradbroke, Bald Hills-Everton Park and Kenmore-Brookfield-Moggill undergoing the greatest reduction in the time taken to save an entry-level house deposit.

Dave Harding, from Ray White Capalaba, said the prime first-home buying conditions in his patch had sparked a level of out of control activity he’d never seen before in the base end of the Redlands market, which was leading to an increase in property prices.

“I’m baffled [by the rate of activity] … but with those first-home buyers, I think it could be that they were forced to save during COVID … and they have moved out to the Redlands and the Capalaba area,” Mr Harding said.

“Before COVID most of our buyers were from the Redlands area, but now 70 per cent are from outside of it … and while I thought something like a school or a new harbour would put a spotlight on the Redlands map, what sped it up was the pandemic.

Time to save a deposit, entry-level houses

City

Entry price

20% deposit

Time to save

Annual change, months

5-year change, months

Sydney

$680,000

$136,000

6 years 6 months

2

4

Melbourne

$600,000

$120,000

6 years

2

16

Brisbane

$450,000

$90,000

4 years 6 months

1

8

Adelaide

$375,000

$75,000

3 years 11 months

0

3

Perth

$366,580

$73,316

3 years 5 months

-1

-6

Hobart

$380,000

$76,000

4 years 2 months

3

15

Darwin

$362,000

$72,400

3 years 1 month

-1

-7

Canberra

$606,060

$121,212

5 years 5 months

4

12

Source: Domain

 

“Since COVID, people can work from home and they aren’t going to the entertainment in the city. Now anything under $600,000 is flying out the door.”

But while that attractive cocktail of purchasing conditions had fuelled the surge, he said a lack of stock was sparking fierce competition.

Ray White Holland Park agent Steve Landeta also reported a strong rise in first-home buyer activity and said many were hitting the market at a sprint, buoyed by low interest rates and the government deposit scheme.

“A lot of people weren’t spending money with COVID … and they aren’t going out as much,” Mr Landeta said.

“But stock levels are very low at the moment especially in these areas [such as Holland Park] and next year there’s a lot of economists saying early-to-mid next year it will be a bit shaky.”

The time taken to save a deposit for an entry-level unit in Capalaba and Holland Park-Yergona dropped 6.5 per cent and 6.7 per cent respectively over the past year, while on the other end of the spectrum, first-home buyers of budget units in Brisbane’s inner east are now taking 6 per cent longer to save their deposit.

SOURCE: https://www.domain.com.au/news/this-is-how-long-it-takes-to-save-for-a-first-house-in-brisbane-989933/

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