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It is becoming harder for first-home buyers in Australia to save for the typical 20% deposit, as affordability continues to be a major roadblock to homeownership.

According to Helia’s First Home Buyer Report 2022, the sentiment among first-home buyers went down — only 57% think it is a good time to buy, down from 67% last year.

First-home buyers who are optimistic about buying prospects were more likely fit the following:

  • Aged at least 40
  • In a household earning at least $250,000 annually
  • Based in metropolitan areas
  • With access to family assistance
  • Seeking to own their first property for under two years.

Affordability remains a big hurdle for buyers, cited by 68% of first timers.

Saving a deposit is also a major concern for 60% of buyers.

In fact, the number of first-home buyers aiming for a 20% deposit fell again, now only at 25% compared to 41% in 2019.

Over the same period, the usage of lenders mortgage insurance (LMI) almost doubled, rising from 36% in 2019 to 71% in 2022.

Helia CEO Pauline Blight-Johnston said LMI is being increasingly used as a strategic tool to help many Australians enter the property market sooner.

“We are proud to be developing new solutions which will provide more opportunities to meet this growing need,” she said.

“Given many FHBs are motivated by the long-term financial benefits of home ownership and are keen to avoid rising rental costs, we expect to see more emerging strategies and pathways being considered by the new generation of home buyers.”

Meanwhile, the Helia research found that there is a potential decline in family support available to first-home buyers — 62% of recent buyers were able to get assistance from parents or family while only 43%5 of prospective ones are expecting the same.

“We understand the impacts that housing affordability issues, climbing interest rates and rising inflation are having on so many Australians today,” Ms Blight-Johnston said.

The report also found that first-home buyers are diverging into two distinct groups — higher-earning Australians who may have family support and are taking falling prices as opportunity; and younger buyers in regional areas or without family backing who are feeling at risk of being left behind unless further support is available.

Some alternative pathways cited in the report are applying for the First Home Super Saver Scheme (11%), rentvesting (8%), and equity schemes (6%).

“Among those who are aware of and understand the strategy, 74% said they will consider a deposit gap loan, followed by 63% that said the same of the First Home Super Saver Scheme,” Ms Blight-Johnston said.

“For FHBs who are unaware but had the strategies explained to them, 63% agreed they would consider the First Home Super Saver Scheme, followed by 55% that say the same about rent-to-own.”

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Photo by Arthon meekodong on Canva.

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