Australians looking to buy a property will now need to save as much as $65K more than 5 years ago as booming house prices hiked up how much buyers need to front up in order to buy their dream home.

Australia’s property market defied the many doomsday forecasts and moved through the bottom of the cyclical downturn in early 2023, making the V-shape recovery in prices.

The property price upturn is firmly entrenched, rising for 17 months in a row with many markets hitting new record highs.

While the strengthening market and climbing property prices are good news for many, buyers now need to save more than ever to reach the recommended 20% house deposit.

How much deposit do you need to buy a property in Australia?

Here’s a breakdown of how much more buyers need to save to buy a median property in each Aussie state.

The median house price in Sydney sits at $1.42 million as of June 2024, a strong uptick from $1.14 million in the December quarter of 2019.

That translates to an extra $55,800 to take the new 20% house deposit total to $282,800.

In Melbourne, the median house price has risen to $941,000, up from $902,938 5 years ago.

Those wanting to live in a house in Melbourne will need to fork out an extra $6,400 so that they can afford the $187,000 deposit.

In Brisbane, median house prices have jumped to $920,000 up from $583,652 just 5 years ago – this surge has added an extra $65,200 onto the deposit needed.

Perth is the same story also.

Data shows that buyers need to get together an additional $41,100 in order to buy a house in Perth thanks to the city’s new $735,276 median house price, up from $529,783 just 5 years ago.

Potential unit buyers won’t have better luck either.

Buyers now need an extra $20,500 in Sydney, an extra $10,300 in Melbourne, an additional $35,100 in Brisbane, and $32,600 more in Perth.

The average deposit for a house

The average deposit for a unit

How long does it take for an average home buyer to save for a deposit?

According to Domain’s First Home Buyers Report 2024, which is based on the average income for a couple aged between 25 and 34 years old in each capital city using ABS Estimates of Personal Income, it takes the average buyer 4.9 years to save enough to buy a house and 3.5 years so save enough to buy a unit.

But there is some relief.

Despite higher property prices, and therefore higher deposits, higher interest rates accrued on savings (and the beauty of compounding interest over time) and better wage growth have aligned to reduce the time to save for an entry-priced home deposit overall.

Nationally, the time to save a deposit has declined by 2 months for an entry-priced house and 1 month for an entry-priced unit compared to this time last year, the report explains.

This is a result of stronger wage growth and the higher compounding interest accrued on savings being able to keep ahead of growth in entry house and unit prices nationally.

The reduction is starker for entry priced houses across the combined capitals, with 3 months wiped from the savings time compared to an increase of 1 month across the combined regionals.

It’s improved for entry-priced units too, reducing by 1 month across the combined capitals and 2 months across the combined regionals.

The high costs of buying a house have seen a growing number of would-be buyers turn to the ‘bank of mum and dad’ to ask for help.

While others are planning to lean heavily on lenders’ mortgage insurance (LMI).

Westpac’s latest Home Ownership report reveals 44% of Australians are planning to purchase a new property in the coming five years – up 9% in six months – with nearly half (47%) of homebuyers willing to fork out for LMI in order to purchase their first property.

Home loan lenders will typically demand a borrower pay LMI if they don’t have a deposit equivalent to 20% of a property’s value.

Government incentives to help first-home buyers

If the bank of Mum and Dad isn’t an option, there are 6 government incentives to help first-home buyers into the market without having to save the huge recommended 20% deposit.

Metropole has been helping Australians buy their next home since 1979.

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1. Lenders’ mortgage insurance

LMI is required for purchases where the deposit is less than 20% of the purchase price.

The LMI premium is arranged by the lender, not the borrower, but is payable by the borrower and is calculated on a percentage of the purchase price.

Given it’s calculated on the size of the deposit you’ve managed to save, the smaller your deposit, the more costly your LMI.

2. Home loan guarantee scheme

There is also the home guarantee scheme, which is a federal government program to help first-home buyers enter the market sooner.

In its current form, the scheme allows eligible borrowers to take out a mortgage with a deposit as small as 5%, without paying lenders’ mortgage insurance.

This is done by the government by guaranteeing up to 15% of the loan.

Note: Applications are limited to singles with an income of up to $125,000 or couples with $200,000.

Purchases under the scheme are limited to between $350,000 in some regions, to up to $950,000 in Sydney for new homes.

3. First home super saver scheme

First Home Super Saver Scheme (FHSS), introduced by the Australian Government in the 2017–18 Federal Budget, supports first-home buyers who meet the eligibility criteria to save money for a house deposit using their superannuation fund.

You can benefit from this by both the tax concessions on superannuation and on being able to take out up to $15,000 of your voluntary super contributions from any one year – and up to a recently increased all-time total of $50,000.

Note: The catch is you need to apply to the federal government for permission before you buy your home.

It’s also worth remembering that using this scheme will diminish your future super savings.

4. First homeowner grant

The first homeowner grant scheme, introduced nationally on 1 July 2000, is funded by the state and territory governments and administered under their legislation.

A one-off grant is payable to low–income first homeowners who apply and satisfy eligibility criteria.

Examples are that at least one applicant must be a permanent resident or Australian citizen, each applicant must be at least 18 years of age, and temporary residents do not qualify to receive the grant.

In NSW, applicants can receive $10,000 for a new home priced up to $600,000, or up to $750,000 if you’re building it yourself, and are exempt from paying stamp duty on homes up to various values.

In Victoria, applicants can also get a $10,000 grant for a new home valued up to $750,000, and $20,000 for those in regional Victoria, also with stamp duty exemptions.

In Queensland, the grant is $15,000 for a new home similarly valued up to $750,000. Again, there are stamp duty exemptions.

READ MORE: Government Schemes for Home Buyers

5. Low deposit schemes

Some developers are now looking at ways to make off-the-plan homes more affordable to first-home buyers.

For example, Domain reported that Third.i have launched a “co-posits” scheme with investment firm CoPosit for its Dairy Farmers Towers project in Newcastle, NSW.

The scheme means buyers can purchase a property with $10,000 in savings, with the remainder of the deposit paid over weekly installments until the apartment is ready.

If it proves popular, it’s likely more developers might introduce similar schemes to help first-home buyers purchase their properties.

Note: Despite softening property prices across most of the country, median house prices are still significantly higher than pre-pandemic, even though interest rates are rapidly rising.

6. Alternative ways to get into the market

It can be an anxious time for first-time buyers trying to get their foot onto the property ladder as increasing costs and dwindling borrowing capacity mean the home ownership dream may be slipping further away.

Of course, another option to get into the market would be through a rent-and-invest strategy, where you essentially buy an investment property first (where you can afford to buy) and rent where you want to live (but probably can’t afford to).

It’s a tactic that overcomes financial obstacles and exorbitant property prices because you can buy in a location that fits your budget and then rent in a location that suits your lifestyle.

It works because even though you’re renting, the property you buy is an asset that’s growing in value (assuming you choose a smart location) and being (in part) paid off by your tenant.

Not only that, but you’re gaining equity that can launch you into other property purchases down the track, including (when the time is right) a home to call your own.
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READ MORE: Government Schemes for Home Buyers

While there are also many government incentives out there for first-time buyers to buy without the added pressure of saving a huge 20% deposit, there are also plenty of risks involved.

Before going down the route of one of the many available government schemes on offer, make sure you speak to an expert, such as the team members at Metropole, to ensure your potential property purchase makes good investment sense.

About Leanne Spring
Leanne is a highly experienced Buyers Agent in the Brisbane Real Estate market. Leanne became a passionate lover of property in 2001. Since then, both professionally and personally, she has been involved in all aspects of property including purchasing, negotiating, renovating, and selling.