This is fairly theoretical. Most families are small these days -- with one or two children -- so young people looking to buy should mostly have parents able to assist with the purchase in various ways.
But in cases where parental help is not available for various reasons, one certainly has to feel sorry for the young people involved. In their case they would be best to buy a small home unit as soon as they can. Time will then be on their side and they should later be able to upgrade to something better.
Our present era of high inflation makes it particularly imperative to buy something as soon as you can. Inflation will give you more and more equity in your dwelling, which actually makes you rather rich. I benefited greatly from inflation in the Gough Whitlam era. Gough effectively wiped out a large part of my debts
The share of household income needed to either pay rent or pay off a mortgage has also risen, the report, which measures affordability to the end of March, said.
It’s a bleak picture for long-term residents of regional Australia, who are facing a steeper jump in the ratio of house prices to incomes and a sharper deterioration in rental affordability than their city counterparts.
Despite early forecasts that the pandemic would send unemployment soaring and push property prices down, effective stimulus and ultra-low interest rates sparked a property boom. The shift to remote working also prompted a spate of sea-changers, putting pressure on regional housing markets.
“There’s been a broad-based deterioration in housing affordability over the past couple of years,” ANZ senior economist Felicity Emmett said.
“The deterioration in affordability has been much more marked in regional areas on average because we’ve seen prices and rents go up there generally at a faster rate.
“With the push to flexible working, capital city workers have been able to move to the regions. Often these are knowledge workers that are relatively highly paid, and so they’re able to afford to pay higher prices for homes or pay more for their rent.”
Nationally, the median dwelling value is 8.5 times the median household income, a record high and up from 6.8 since the pandemic. But across regional Australia, the ratio is 7.9 times, up from 5.9 pre-pandemic.
For someone earning the median capital city income and looking to tree-change into the median regional home, the ratio is only six times, making the move an attractive option for higher-income workers.
The house price boom has outstripped wages growth, so it takes longer to save a deposit on average.
For someone who could save 15 per cent of their income, it would now take a record 11.4 years to save a 20 per cent deposit for the median home. That’s an increase of 2.2 years since March 2020, the fastest gain in this metric ever.
Once a buyer manages to save a deposit, they will need to set aside a higher share of income to pay off their mortgage, with the portion of household income needed to service new mortgage repayments rising to 41.4 per cent, well below record levels but above the decade average of 36.5 per cent, and the third consecutive increase.
Potential buyers trying to save a deposit are also facing higher rents, with the share of income needed to service rent on a new lease lifting to 30.6 per cent, higher than two years earlier.
She said many first-home buyers are getting help with their deposit from parents or grandparents, although hard data remains scant.
“It’s increasingly becoming the case that whether you’re able to buy a home and become a first-home owner increasingly depends on what sort of job your mum and dad had, and I suppose the question is – is that really, as a society, what we want?” she said.
She doubted housing affordability would improve much this year when rates rise, as mortgage repayments will be higher and property prices are not likely to fall enough to move the needle.
Damien Walker, mortgage broker at Atelier Wealth, said some first-home buyers are bridging the deposit gap by turning to lenders that offer loans with a low 15 per cent or 10 per cent deposit and no lenders’ mortgage insurance.
Others are getting help from parents in the form of cash gifts or guarantor loans, and some are using the federal government’s First Home Guarantee scheme.