Though homeowners in Canberra welcome the recent cuts to interest rates, those who are trying to save for a deposit feel trapped in the ever-rising Canberra rental market.
"The main challenge is saving for the deposit, rather than paying off the mortgage," said Domain chief economist Andrew Wilson. "Incomes aren't growing at all. Even though the ACT has among the highest income of any of the capitals, the trend is towards declining affordability."
A survey of 1000 18-34-year-old respondents showed that more than half believed that the increased cost of living priced them out of buying a home, in spite of the national capital's above average income levels.
"I think it's the same problems we have Australia-wide and that's low incomes growth. The low incomes growth just doesn't give the capacity to save faster or to catch up with that deposit gap," Wilson said.
Hence, a lot of millennials are opting to rent rather than buy.
"We're seeing young people paying well in excess of 50 per cent of their pre-tax income on rent," said Travis Gilbert, ACT Shelter executive officer. "It's the more drastic end of the scale, but some are going without meals to pay rent."
Gilbert said that the 10 per cent deposit required for a standard $420,000 two-bedroom apartment can quickly jump from $42,000 to $64,000 once stamp duty and mortgage insurance are factored in.
"The paradox is if once you have a deposit, it's often cheaper to buy than rent in Canberra," he said. "Apartments can be cheaper to buy if they can raise the deposit."
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