Aspiring homeowners are struggling to save

Published in the Daily Telegraph, May 2017 by Aidan Devine

Aspiring homeowners are going to increasingly outlandish lengths to help save deposits faster, including growing their own food to save on grocery bills.

He's temporarily quit alcohol and grows some of his own food to cut down on his living costs but after three years of aggressive saving, salesman Jason Rolph feels no closer to putting together a home deposit.

The Georges Hall resident is part of a growing group of aspiring homeowners who claim they’ve been shut-out of the housing market because their deposit requirements are growing faster than they can save.

The 48-year-old divorcee, who earns an average wage, said banks’ stricter lending policies mean he needs a minimum 20 per cent deposit but rising home prices have made it challenging.

He has responded by cutting all but his basic expenses, even walking most places to save on Opal card costs and eating veggies grown in the backyard of his rented granny flat.

“It’s extreme but it’s made no difference. It’s like I’m only treading water,” Mr Rolph said.

CoreLogic research revealed the challenge for him and other buyers: with Sydney’s median house price at $922,000, stumping up a 20 per cent deposit requires $184,400 in savings.

This is in addition to roughly $37,000 in stamp duty costs.

Even buyers of homes priced at $660,000 — the cheaper end of the Sydney market — require about $60,000 for a 5 per cent deposit and stamp duty.

And that’s only if prices don’t increase by the time they’ve saved enough.

Were prices to continue rising at 10 per cent a year, the average for the last four years, middle-income couples who began saving today would still not have enough deposit for a typical home in 10 years, according to data.

The analysis assumed the couple was putting together a 20 per cent deposit on a median priced home, saved a third of their net income and saw annual wages growth at the NSW average of 2.4 per cent.

Finder money expert Bessie Hassan said Sydney’s cooling housing market made the scenario unlikely but it still illustrated the uphill battle facing homebuyers.

“There is a huge disparity between wages and house prices in Sydney so getting into the housing market is incredibly difficult,” Ms Hassan said.

“It is not surprising some people would give up on owning a home. They look at prices and think they have no chance even if they become strict savers.”

Federal Budget measures giving homebuyers the opportunity to salary sacrifice funds they intended to put towards home deposits wouldn’t solve Sydney’s deposit hurdle, according to Wealth Within investment analyst Dale Gillham.

“The root of the problem is the amount of deposit,” he said. “Who, especially millenials, has $200,000 lying around to whack on a home deposit?”

Mr Rolph said he hasn’t given up on his dream of one day owning a home yet but is changing his expectations.

“I’m trying to be realistic,” he said. “You’ve got to buy what you can afford. I was first thinking Padstow and Bankstown but I’ll have to buy somewhere further out.”

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