Housing affordability is a prominent issue in Australia, with many people feeling locked out of the property market.
Although current property data suggests dwelling values are trending lower, the cost of purchasing real estate is significantly higher than it was a decade ago.
Several factors have contributed to the rising cost of housing.
The deregulation of financial markets, inflation targeting by the Reserve Bank which has contributed to much lower mortgage rates, high population growth coupled with an insufficient supply response, increasing construction costs and an ongoing rise in investment have all played a part in housing affordability.
Given the increase in prices many buyers are asking themselves – how long does it take to save a house deposit?
It’s important for homebuyers to know how much they need to get into the property market and how long it will take to save.
Years to save a 20 per cent deposit
The table below outlines how many years it takes to save a 20 per cent house deposit based on location.
In regional Australia, households will need to save for 8 years for a house deposit, 7.8 years for dwelling and 7.1 years for a unit.
Household income vs housing affordability
According to the ANZ Housing Affordability Report 2019, the average Australian household saves 15 per cent of their gross annual income.
As of December 2018, the median household income in Sydney was $1,819 a week, an increase from $1,288 per week a decade ago.
Despite the increase in income Sydney was still Australia’s least affordable housing a market, with a median dwelling value of $808,494.
Outside of the capital, regional New South Wales recorded a median weekly income of $1,217, up from $865 in 2008, and a median dwelling value of $449,195.
In Melbourne the median household income was slightly below Sydney at $1,639 per week, while regional Victoria recorded $1,212 a week. The dwelling values were $645,123 and $357,200 respectively.
Up north, Brisbane households earned $1,610 a week, with a median house price of $493,58. Over the past decade, regional Queensland’s median dwelling values have lifted by just 4.4 per cent (currently at $371,667). By comparison, household incomes have increased by a much greater 28.9 per cent (currently at $1,312 per week).
Darwin has emerged to be one of Australia’s most affordable capital city property markets. Relatively high wages combined with ongoing declines in property values and rental prices have continued to improve housing affordability in the top end. As of December 2018, the median household income was $2,216 a week and the median property price $416,149.
Regional Northern Territory recorded similar results, with dwelling values trending 5.3 per cent lower and household incomes 1.3 per cent higher over the past five years, resulting in improved affordability. In regional Northern Territory the median dwelling value was $352,877 while the median income was $1,218 per week.
Adelaide had relatively lower household incomes compared to other capital cities, with a median income of $1,336 per week. Dwelling values were also relatively moderate at $434,924. In regional South Australia the household income was $1,100 a week and the median dwelling value $235,788.
Perth dwelling values have been falling since 2014 while household incomes have been growing. This has contributed to an improvement in housing affordability. As of December 2018, the median property price was $446,011 and the household income was $1,635 a week.
The opposite can be said for regional Western Australia, where house prices are increasing (median dwelling value of $295,490) while incomes are declining ($1,393 per week). Despite the decline in affordability, regional Western Australia is more affordable than it was a decade ago.
Down in Tasmania, Hobart dwelling values increased at more than double the rate of household incomes, contributing to a worsening of housing affordability. The median property price was $457,523 and the income recorded at $1,330 a week. Regional Tasmania experienced the opposite, with household incomes increasing at a faster rate than dwelling values. The median dwelling value was $285,433 and the household income $1,070 a week.
Now you know how long it takes to save a house deposit based on saving 15 per cent of your gross annual income, start saving today.