Saving for a house deposit is a big challenge for single professionals, couples, newlyweds and growing families who wish to acquire their own property in Canberra. A recent First Home Buyer Survey conducted by Canstar in July revealed how potential first home buyers are likely to stress out over property purchasing. Around 90 percent, an overwhelming majority, claimed that they are "stressed" (somewhat, very or extremely) about their first foray into the property market.
The survey interviewed nearly 700 people who intended to buy their first home. 48% reported to be somewhat stressed, 19% were very stressed, while 23% relayed extreme stress levels. Only a meagre 10% denied being stressed at all. Majority of the surveyed individuals also planned to purchase property within the $400,001-$800,000 price range. A smaller group, about 21% of the participants, said they wanted to buy property valued around $800,000 16% preferred to spend $400,000 below.
How Much Savings Should You Have?
CoreLogic, a leading property data analyst in Australia, estimates the median house price to be a little over $800,000. This means that first time home buyers in Canberra and across the country should save more than $80,000 to secure a home deposit of at least 10%. To make a 20% deposit, they need double the amount. 36% of the survey participants were looking to save for a 10% deposit, while 37% aimed to cover up to 20%.
Experts believe there are market forces getting in the way of first time home buyers. According to Effie Zahos, editor and finance expert from Canstar, "costly living expenses, rising rents, sky high property prices, [and] lower borrowing limits", exacerbated by low income growth paint a bleak picture for neophyte buyers. Although these factors might discourage them from taking part in the current property market hope still springs eternal. Miss Zahos pointed out one "saving grace" and that is the gradual slowdown of property prices.
However there seems to be a trade-off. As home prices start to drop, mortgage costs and rents are on the rise. What home buyers need to do is "strike while the iron is hot." The Canstar money expert also advised buyers to adopt a more "realistic view of the market" and purchase property within a budget range they can afford. It usually takes decades to save up for a 20% deposit on a house valued at $800,000 above. A better alternative, so you need not endure a 10-year savings timeline, would be to buy a reasonably priced home in a new suburb.
The survey notes 3 factors that negatively affect a buyer's house deposit savings. Household expenses topped the list, accounting for 59% of participant responses. Rent and food bills placed second and third with 53% and 43%t respectively. Majority of potential home buyers said they save money for a home deposit month after month. A small percentage of the survey respondents, around 7%, hardly saved a penny.
Saving for a home has been quite a challenge in the pandemic era. Rent prices and overall costs of living are surging. Wage growth is either slow or stagnant, making it difficult for home buyers to overcome issues of property affordability. If you are serious about saving for your home deposit, experts suggest changing one's lifestyle. Rather than renting an entire house, for example, you can move to a unit. Depending on where you are in Australia, you can save as much as $186 each week in Canberra or a little over $130 if you live in Sydney.
It also pays to monitor your food expenses and make some sacrifices. Cut back on meal deliveries, dining at restaurants, and buying coffee from stores. Through these simple changes, you will have saved thousands of dollars at the end of the year. If it is not too much trouble, you also have the option to choose a good location and relocate somewhere cheaper. Research on suburbs with cheap rental prices or mortgage firms offering affordable interest rates.
Each time you save for a house deposit, you are a step closer to obtaining your dream home. If you are serious about ramping up your savings for a future home purchase, do not wait for the tides to turn in your favour. Start small if you have to, but be consistent. Maintain a healthy savings habit and avoid risky investments. Should you need further advice or would like professional guidance throughout the property purchasing process, feel free to touch base with our independent Canberra buyers' advocates during business hours.
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