It would now take 14 years for buyers to save the 20% deposit, but first-time homebuyers Brianne Keogh and Angus Mills weren’t waiting.
Determined to enter the housing market as soon as possible, the couple took drastic steps to find a deposit and compromised on the location and type of property they were going to buy.
“We had to make a lot of sacrifices, including going home with my parents and forgoing vacations and going out on weekends to save money faster,” Ms. Keogh said.
“We wanted to buy closer to town and get an existing house that we can renovate, but it would have taken us a lot longer to save the deposit, and we’re not prepared to wait.
“So we decided to buy a house and land in Doreen, on the outskirts of Melbourne. It took us over three years to dramatically cut our expenses to save the 5% down payment we needed.
Felicity Emmett, senior economist at ANZ, said the pandemic and some government housing policies have exacerbated the situation.
“We are now in a situation where the gap between those who have already taken up home ownership and those who have not yet has really widened, and I think that for a lot of people, they will never be in. able to close that gap, ”she said.
“It’s a situation that has become increasingly difficult over the past 20 years or so and with the sharp increases in house prices over the past year, it makes housing very inaccessible.”
“We already have cases in Sydney and probably Melbourne too, where essential workers cannot find affordable housing near their workplace.”
Ms Emmett said affordability could get even worse over the coming year as prices continue to rise, albeit at a slower pace.
“The main problem is that house prices have increased much faster than incomes – now 12.5 times the average household income in Sydney,” she said.
“Even with a strong moderation in growth, we’re still going to see a 6 percent increase in home prices next year.
“Household incomes are unlikely to increase by the same amount, as wage growth remains stuck in the 2 percent range. So we really need house prices to rise at a slower rate than household income for an extended period to improve some of these accessibility measures.
Eliza Owen, head of research at CoreLogic Australia, said that even with housing price growth slowing, affordability remains a challenge.
“If house prices slow down, affordability won’t deteriorate as quickly, but even if house prices drop 10% or 20% or something really dramatic, that doesn’t make a big dent for people. people who have seen relatively low income growth and whose jobs have also been disrupted by COVID-19, ”she said.
“At the same time, when we start to enter a downturn, it will likely be due to higher interest rates. And so, we’ll likely see a larger increase in the portion of income needed to service a mortgage, which will also worsen affordability. “