Domain calls for government action to support FHBs

Dr Nicola Powell, chief of research and economics at Domain, has called for government action to assist more first home buyers (FHBs) who are struggling to save for a deposit.

The call came following the release of Domain’s 2024 First Home Buyer Report, conducted in partnership with CBA’s digital lending brand Unloan.

Domain’s report found that the time for young FHBs to save for a 20 per cent house deposit (excluding stamp duty) reduced slightly from 2023. According to the report, the average time taken to save dropped by two months nationwide, from four years and 11 months to four years and nine months.

However, Sydney remains the city where it takes the longest to save a deposit, taking young Australians six years and eight months to save, based on the average dual income of a couple aged 25–34. This reflected Sydney’s very high house prices.

Dr Powell stated: “The current market still poses significant challenges for first home buyers, given the record-high property prices and the ongoing cost-of-living crisis.”

Mortgage serviceability becoming ‘stretched’

Mortgage serviceability has also become “stretched across [the NSW] capital”, according to Dr Powell, as mortgage repayments now account for 46.5 per cent and 30.7 per cent of a borrower’s income for houses and units, respectively.

According to Dr Powell, borrowers should be dedicating less than 30 per cent of their income to mortgage repayments to avoid “mortgage stress”.

Dr Powell commented: “The stretched mortgage serviceability highlights the dual effect of high cash rates on first home buyers. While there has been a slight reduction in the time required to save a deposit (for those who can consistently save and have experienced wage growth), the higher interest rates are also making home loan repayments more difficult, which is why more people are facing mortgage stress.”

Reflecting on rising house prices, mortgage serviceability, and the time it takes to save a deposit, Dr Powell said: “This complex situation does underscore the need for government action.

“While initiatives like the Help to Buy scheme offer promising solutions, tackling housing undersupply in the long term requires concerted efforts from our government.”

The government has been tackling home ownership in several initiatives over the past few years, including the Home Guarantee schemes and the incoming Help to Buy scheme.

The long-awaited Help to Buy scheme, which is currently going through the legislative process in Parliament, would allow up to 40,000 eligible Australians to buy a home with a deposit of 2 per cent or more.

The shared equity scheme could, according to Housing Minister Julie Collins MP, “help eligible new home owners save hundreds every month on their mortgage”.

The scheme, however, still awaits approval and is currently being read by Parliament for a second time.

Calls for government action to support FHBs have been growing recently, as the government prepares to release its federal budget and its long-awaited Cost of Living package.

In the 2024 Insights report from Your Financial Wellness, only 22 per cent of those prioritising home purchases had enough saved for a 20 per cent deposit (based on a home valued at $780,000).

The report concluded: “[The data] makes a compelling case for policymakers and financial institutions to emphasise the benefits of home ownership – it is a goal that if fulfilled is most likely to lead to financial wellness.”

[Related: Greens take aim at negative gearing, capital gains tax]