The suburbs where it's quickest to save a deposit for your first home

Scott Kuru February 23, 2024 4 min read

KEY POINTS

The number one determinant of how long it takes first-home buyers to save up a standard 20% deposit for a home is where they live in Australia
Research shows while a 25-34 year old couple from Sydney on average wages would have to save for nearly 7 years, a similar couple in Darwin could put a deposit down on an apartment after just two years.
However, with compromises on the type of home and locations within capital cities, first-home buyers can drastically reduce the time needed to save a deposit and get their foot on the property ladder

There’s no question that Australia is one of the most expensive places on earth to buy residential property, and over the last 30 years, the number of younger Australians (those aged 25-34) achieving home ownership has fallen.

That doesn’t necessarily mean the dream of home ownership is out of reach, though.

New research from the Domain real estate group and Unloan - the Commonwealth Bank’s no-frills digital lending arm - looks specifically at the locations and the types of properties that provide the best opportunities for a couple in this cohort on average wages to climb the property ladder.

The findings

It’s no surprise that the top of the list is where in Australia you live.

“First-home buyers across our capital cities face vastly different journeys when saving for a 20% deposit on an entry-priced home, from 2 years and 3 months for an entry unit in Darwin to 6 years and 8 months for an entry house in Sydney,” the report says.

Australia’s most expensive city also tops the list when it comes to saving for the deposit on an entry-level unit - at 4 years and 6 months.

Canberra has the second-longest time to save for an entry-price house deposit, followed by Melbourne, then Brisbane

“The west-side story keeps getting better,” say the report’s authors - Dr Nicola Powell - Domain’s Chief of Research and Economics and Dan Oertli - the CEO of Unloan.

“Perth offers a lower entry purchasing price mixed with a relatively higher average wage, creating the ideal outcome of the second shortest saving time for houses and units.”

Domain and Unloan chose the 20% deposit figure, as this is usually the minimum required by lending institutions without requiring borrowers to take out expensive lenders’ mortgage insurance (LMI).

This is less of a problem for investors who can often deduct the cost of LMI from rental property income.

Domain and Unloan’s calculations were also based on the couple making regular contributions to a high-interest savings account as they built their home deposit.

However, the report points out that there are two sides to higher interest rates - yes, they might enable you to save for a deposit faster, yet when you take out a property loan, it will mean costlier repayments.

Type of property

A clear theme running through Domain and Unloan’s 2024 First-Home Buyer Report is that it’s still possible for younger buyers to get onto the property ladder - especially if they don’t have the backing of the so-called “Bank of Mum and Dad” - but they need to be realistic.

“The type of property a first-home buyer has set their sights on can significantly affect when they step onto the property ladder,” say Nicola Powell and Dan Oertli.

“It’s not a surprise that the time to save a deposit for an entry-priced unit is significantly shorter than for an entry-priced house, given the difference in purchasing price,” they say, pointing to data which shows that across the combined capitals, a first-home buyer could purchase an entry-priced unit 18 months sooner than a detached house.

“The speed to market access is even starker across our most expensive cities, Sydney and Canberra, with the savings time for units 2 years and 2 months shorter than that for a house.”

The difference isn’t so stark across the combined regional measure, with couples being in a position to be able to put down a deposit on a unit only 11 months earlier than a house, reflecting the narrower price differential between property types in regional Australia.

Location, location, location…

Compromises might also be needed when it comes to the location of property for first-home buyers, particularly if they are looking to purchase a house.

So while Domain and Unloan say the citywide figure for a young Sydney couple to save a deposit for an entry-level house is 6 years and 8 months, they would need only 5 years and 7 months to save for a house in Wyong on the Central Coast, which is still within the Greater Sydney urban area.

Likewise in Melbourne, saving for a deposit on an entry-level house in the Melton-Bacchus Marsh area in the city’s outer west would take only 4 years and 6 months, compared to the citywide average of 5 years and 5 months.

But it’s not always a case of having to look far afield from city centres.

For example in Perth, the area with the shortest time for a couple to save a 20% house deposit includes suburbs surrounding the CBD.

It would take only 3 years and 3 months in the Australian Bureau of Statistics “Perth City” area, which takes in suburbs such as Subiaco, Highgate, Inglewood and Shenton Park.

city areas to save quick for deposit_apu

Looking forward…

The 2024 First-Home Buyer Report says that while the upcoming revised stage 3 tax cuts are expected to reduce the time needed to save a deposit by an additional month for entry-priced houses and units, in most cities “this alone isn’t sufficient to significantly impact the market”.

In contrast, it notes the federal government’s proposed Help to Buy scheme is a much more substantial initiative, “dramatically reducing the time required to save for a deposit.”

Under that limited place scheme, it’s possible for people to buy a home with as little as a 2% deposit, with the government taking a shared equity stake.

Schemes like this “highlight how effective policies can support our first-home buyers”, Domain and Unloan say.