may be bolstered by a cash gift or loan,but even those living in the family home have a significant edge over peers who may not have that luxury,new analysis shows.
First home buyers able to live in the family home while saving a deposit can get to auction day three times faster than those who are renting.Peter Rae
The average Australian could save almost $25,000 a year by swapping flat sharing for living in the family home rent-free,modelling from Finder shows,and as much as about $137,800 if they stayed there for five years.
That’s assuming they are saving $289 per week on rent,which CoreLogic figures show is about half the $577 paid for the median-priced capital city rental in the December quarter,as well as about $190 on other expenses,based on average costs for bills,groceries and household maintenance items. It also assumes these funds were put in a savings account with a 3.05 per cent interest rate.
Graham Cooke,head of consumer research at Finder,said a few extra years spent living with family could make a big difference to the time taken to save a home deposit,particularly given the rising cost of living and reduced borrowing power.
“Rents and competition for rentals are going through the roof … and while property prices are down,the cost of borrowing is up dramatically,so it’s getting more and more difficult[to save a deposit],” he said.
“A few extra years at home can add thousands to a person’s savings. The power of compound interest means those fortunate to live a couple more years rent-free will be the first to enter the property market.”
An average Millennial or Generation Z saver,who has about $17,900 in savings and puts away an additional $872 each month on top of the funds already saved from not paying rent and bills,based on average savings data from Finder’s Consumer Sentiment Tracker,could build their wealth to more than $216,000 over five years.
Those renting in more expensive suburbs or cities,or on their own,could see greater savings from returning to the family home.
A renter saving at the same rate would take about 15 years to reach a similar amount – assuming a constant interest,income and savings rate. They would save less than $80,000 over five years.
Cooke said those who could not or did not want to return home would find it harder to save,even if they moved to a cheaper property and saved into a high-interest account.
“People from more privileged backgrounds are more likely to be[able to move back in with family] … not everybody has the same fair go. That’s how it’s always been,but the pressure is much higher now.”
In Melbourne,nurse Brittany Hastings decided against moving out of her family home in outer suburban Wonga Park when she finished her studies.
The 25-year-old does pay board,but is saving a deposit much faster than she could if she was renting — with about half of her income going towards her deposit savings — and is grateful to have the option to live with her parents.
Brittany Hastings is grateful to be able to live with her parents while she saves for a home deposit.Luis Enrique Ascui
“Even being at home and saving as much as I can,it’s still hard when buying on your own,” she said.
“I would have absolutely no idea how to save while paying rent ... it would take me at least double or if not triple the time,and I’d still have to rely on some kind of family help or guarantor.”
Hastings is aiming to save a 20 per cent deposit,and hopes to buy and move out soon. While her savings are growing,rising interest rates meant she was able to borrow less,and had to focus on building a bigger deposit.
“I do feel a bit old to be living at home ... but I don’t think I’ll be embarrassed about it when I have saved a house deposit.”
Her mortgage broker Chris Foster-Ramsay of Foster Ramsay Finance said about seven in 10 were receiving family support,and many were living in the family home for longer to boost their savings.
The most common scenario was for first home buyers to save between $50,000 to $75,000 on their own,and have their budget topped up with a cash gift to avoid paying lenders’ mortgage insurance. Others turned to a family guarantee,or a government guarantee if they could not rely on family.
“[Those buyers purchasing] later,that’s where there has been a hard save over a long period of time,and they will always bring up the government schemes.”
However,with buyer borrowing power reducing,and more properties now priced over the cap,that was of less assistance than when it was first introduced,he said.