It comes as separate figures from Domain show the average first home buyer couple would need to put half of their income towards mortgage repayments on an entry-level Sydney home,up from less than a third of income two years ago.
Rising interest rates have sent mortgage costs soaring while only slightly reducing the deposit required to buy a home in the city’s pricey property market.
The study of 25- to 34-year-olds in Sydney and Perth asked more than 850 respondents about their housing aspirations and found 40 per cent expected family assistance. It was conducted by the Australian Housing and Urban Research Institute.
Research author and University of Sydney Senior Lecturer in Urbanism Dr Laurence Troy said first home buyers,particularly in Sydney,were forced to rely on financial help from family to be able to get into the market.
That included paying a deposit,or allowing property-owning hopefuls to live rent-free at home.
The owners of units in a Sydney apartment block are still paying their mortgages,despite not being able to live in the building for four years.
“If you’re living in Sydney and trying to buy into Sydney,the only way you can do it is through family support in a fairly significant way,” Troy said.
“Saving up and living frugally won’t work to get you over the line – unless you’re on a big wage.”
He said Sydney first home buyers were facing the toughest conditions in the country,but other capital cities would soon follow.
Changes to employment security had added issues to those trying to save for a home loan,while young first-time buyers to get into the market,he said.
Meanwhile,a young Sydney couple on the average income would need to put 50.9 per cent of their earnings towards initial mortgage repayments if they purchased at Sydney’s entry-level house price of $851,500,modelling from the 2023 Domain First Home Buyer Report shows. That’s up from 31.5 per cent of income in 2021.
Unit buyers would see 34.2 per cent of income chewed up by repayments on a $571,500 entry-level apartment,up from 25.5 per cent in 2021.
Declining property prices have,however,reduced the time it takes the average couple save a 20 per cent deposit for an entry-level home. They would need to save for six years and eight months,down 13 months year-on-year,for a house deposit,and for four years and seven months for a unit,a drop of eight months year-on-year.
The modelling assumes a couple earning a combined post-tax income of $115,204 – the average for 25 to 34-year-olds in Sydney – and saved 20 per cent of income.
Domain’s chief of research and economics Dr Nicola Powell said declining property prices,higher interest rates on savings accounts and an uptick in wage growth had reduced the time taken to save a deposit.
This was not enough to offset the impact of rapidly rising rates,which had cut buyer borrowing power and increased mortgage repayments,ultimately reducing housing affordability.
“The fall in price that we’ve seen hasn’t been enough to offset the rise in interest rates ... there would need to be a serious decline in price for mortgage serviceability to be where it was when rates were at rock bottom,” she said.
Commonwealth Bank’s head of Australian economics Gareth Aird said first home buyer demand had declined since the Reserve Bank first hiked rates in May.
“Saving up and living frugally won’t work to get you over the line”:First home buyers face a bleak outlook.Peter Rae
“It’s quite an ugly scene for first home buyers,” Aird said. “Even though prices have fallen,the reduction in borrowing capacity has been greater. It’s actually become a lot worse for first home buyers because the rise in serviceability makes it harder to get into the market in the first place.
“The only thing that’s gotten better is that the deposit required is a little bit less because house prices are down,but they still have more money going out each month on rent when they’re trying to save.”
Aird said election housing policies – the Coalition’s property tax option and Labor’s vow to increase the threshold for stamp duty exemptions and concessions – would reduce or remove the stamp duty hurdle,cutting the time to save. Mortgage serviceability would continue to be an issue while rates remained higher.
First home buyers in western Sydney would take the shortest amount of time to save a 20 per cent deposit. It would still take five years and six months to save for an entry-level house in the Mount Druitt area,and two years and 10 months to purchase an entry-level unit in the Penrith area.
Mortgage broker Rob Lees,from Mortgage Choice Blaxland and Penrith,had seen a pullback in first home buyer demand,as interest rates climbed.
“We’re not getting as many right now ... a lot of that has to do with[mortgage] serviceability,” he said,noting some borrowers were now being assessed on their ability to handle a mortgage rate close to 9 per cent,given the 3 per cent serviceability buffer.
“That is really quite high and that’s the big issue,given generally ... first home buyers are just starting out[in their careers] and their salaries aren’t as big.”
“In some cases,parents have put money down to lower the loan amount so it actually meets serviceability requirements.”