Rising living costs hamper home ownership aspirations: report
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The cost of living has become the biggest obstacle for aspiring home buyers in Australia, according to a new report by lenders mortgage insurance provider Helia.
The Home Buyer Sentiment Report, prepared by CoreData, reveals the significant impact of rising inflation on potential home buyers’ ability to save for a deposit.
Australian Bureau of Statistics data shows the consumer price index rose 3.8 per cent over the 12 months to June 2024, with housing costs increasing by 1.1 per cent in the June quarter alone.
The report identifies “cost of living pressures” as the most cited barrier to home ownership (54 per cent), surpassing previous top concerns such as housing affordability (43 per cent) and finding suitable properties within budget (42 per cent).
First home buyers (FHBs) are particularly affected, with 24 per cent saving less than 10 per cent of their take-home pay.
One-fifth of home buyers are saving 20 per cent or less of their income, with 25 per cent having saved for three to five years and 17 per cent for over five years.
The report illustrates the challenges faced by potential buyers through an example of a couple earning median wages.
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For a couple each earning $65,000 annually and saving 20 per cent of their take-home pay, it would take nearly 14 years to accumulate a 20 per cent deposit for a median-priced house in Sydney and eight years for an apartment.
In Melbourne or Brisbane, the same couple would need about nine years to save for a house deposit and six years for an apartment at current rates.
The proportion of FHBs aiming to save a full 20 per cent deposit has dropped to 15 per cent from 20 per cent last year and 34 per cent in 2020.
More than a third (36 per cent) of FHBs are now targeting a 10 to 14 per cent deposit.
Three in 10 FHBs have less than two months of income as a savings buffer, making them cautious about potential interest rate increases.
If rates were to rise by 1 per cent over six months, 55 per cent of FHBs believe they would struggle to meet future mortgage repayments.
Housing affordability continues to decline across Australia, with house prices increasing by 8.8 per cent nationally and apartment prices rising by 6.5 per cent.
Sydney remains the most expensive capital city for housing, with a median house value of $1.47 million.
Brisbane and Melbourne follow with median house prices of $966,382 and $929,715 respectively.
To overcome affordability barriers, 70 per cent of surveyed home buyers are considering properties in different areas such as outer suburbs.
This year, 40 per cent of home buyers have begun exploring interstate options, up from 34 per cent in 2023.
FHBs are also considering alternatives to houses, with 64 per cent looking at apartments and 70 per cent considering smaller properties.
The report concludes that despite this flexibility, housing affordability remains a significant obstacle to home ownership, exacerbated by the rising cost of living in the current economic climate.