Saving for eight years plus, as first home buyers face lengthy lock out: Bankwest property report
Australia’s first time home buyers are being locked out of the property market as wage growth fails to keep pace with rising house prices.
A national report from Bankwest reveals there are half as many first time home buyers (FTBs) in the market as a proportion of total buyers in 2016 than in 2009.
Fewer FTBs entered the market in the last 12 months, impacted by the removal of the First Homebuyers Grant for established homes by state governments, coupled with rising property prices. The number of FTBs declined to 90,939 in the year to June 2016, down from 94,517 the previous 12 months.
The proportion of FTBs in Australia has declined steadily over the last five years to 13.4 per cent in 2016, with the remainder repeat purchasers or investors, compared to 28.8 per cent in 2009.
The 2016 Bankwest Financial Indicator Series’ First Time Buyers Deposit Report shows Australian couples will have to save for an average of 4.4 years to accumulate the $103,600 needed for a 20 per cent house deposit on a median priced home.
This is two months longer than in 2015 (4.2 years) and a $3,900 increase on the $99,700 deposit required last year.
Bankwest Executive General Manager, Retail, Andrew Whitechurch said it was taking Australian FTB couples longer to save a deposit on a median priced house in every mainland state and territory except for WA.
“Western Australia bucks the national trend, being the only state where it takes less time for an average first time buyer couple to save for a house than it did last year.
The average time was down marginally to 3.5 years this year from 3.6 years in 2015 and well below the national average,” he said.
“Low interest rates, sluggish wage growth, and rising house prices are making it increasingly difficult for first time buyers to get a foot on the property ladder in most capital cities in Australia.
Australia’s median house value grew 3.9 per cent to $518,000 in the 12 months to June 2016, while variable-lending rates on owner occupier housing loans are notably lower than the 10-year average rate of 6.93 per cent.
We’ve seen extremely strong growth in property values in Sydney and Melbourne, while wages have grown by just 2.2 per cent nationally.
While lower interest rates are beneficial for those who already own their homes in the form of lower loan repayments and interest, they can also bring more buyers into the market and this drive up house prices, making home ownership less affordable for first time buyers.”
Mr Whitechurch said the eighth annual First Time Buyers Report had been produced as part of Bankwest’s ongoing commitment to offer insights on economic data, trends and issues of value to its customers, businesses, communities and policy makers.
“Bankwest is committed to helping customers and local businesses achieve what matters, contributing to the development of our communities and being a positive voice in the debate on the future of the economy.
We hope this annual report, which provides a snapshot of the country’s housing market in 2016, demonstrates this.”
The report shows FTB couples wanting to buy a property in the capital cities faced up to five years’ wait, with Sydneysiders facing the longest saving times.
“The average time for a first time buyer couple to save for a capital city property increased by almost six months to 4.9 years this year from 4.5 years in 2015,” Mr Whitechurch said.
“On average Sydney first home buyers will have to save for more than eight years to accumulate the $214,600 needed for a 20 per cent deposit on their first house (8.4 years), up from 7.9 years in 2015.”
Peppermint Grove in Perth is the local government area (LGA) with the longest savings time in the nation, where it takes 19.7 years for a couple to save the $686,300 needed for a 20 per cent deposit on a median priced house.
However, saving time in this exclusive Perth suburb is down from 20.2 years last year.
Peppermint Grove is followed by Strathfield in Sydney (17.9 years, $410,800) and Mosman in Sydney (17.4 years, $613,000).
Paroo Shire in Queensland’s South West lays claim to the title of the LGA with the shortest savings time nationally of six months to save the $8,500 deposit required.