Melbourne school leavers could face 21-year wait to buy a house, 12 years for unit | Finder

If young buyers want to get into the market with a 20 per cent deposit, they may have to wait years. But some property experts think there are ways to get in sooner. SEARCH YOUR SUBURB

Melbourne school leavers could have to wait an average of 21 years to afford to buy a house.

Melbourne teens finishing high school this year face decades of scrimping and saving to afford their first home.

New data from Finder shows it will take an average 21 years to build a 20 per cent deposit for the city’s $938,552 typical house – which by that stage could be worth more than $1.886m and require a $377,374 deposit.

A far more affordable unit at the Melbourne-wide $635,024 median price would take 12 years of saving, with the same unit by that stage predicted to be worth almost $880,000 requiring a $175,829 deposit to cover the 20 per cent preferred by many lenders.

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An ultra-cheap $300,000 home today, among the absolute lowest prices possible for an apartment in Melbourne or in many regional centres, it would still take the typical high-school graduate six years to save up.

Even if a graduate was able to save a $200,000 deposit over the next two decades for a $1m residence, the income required to service the loan would be around 79 per cent of their wages, making it all but impossible for them to hang onto their home dream.

This two-bedroom apartment at 207/51-53 Buckley St, Noble Park is listed with a $300,000-$330,000 price tag.

It could take a high school graduate around six years on a typical wage to put down a 20 per cent deposit on this residence if it sold for $300,000, Finder analysis suggests.

Finder analysts contrasted the standard income of a student while they’re at university and once they’ve entered the workforce as well as median Victorian property prices and Melbourne’s average price growth over the last 10 years to extrapolate what homes would be worth going into the future — and how much more of a deposit would be needed.

They then factored in putting aside at least 22 per cent of a high-school student’s future wages in savings.

Head of consumer research Graham Cooke said the figuresshowed buying a home was becoming a “pipe dream” for many young Aussies if they didn’t have family support.

“For most people, wage growth simply isn’t keeping pace with skyrocketing property prices; while the bank of Mum and Dad makes it easier for some to enter the property market, not all will have that privilege,” Mr Cooke said.

“Parental support can significantly lower the initial hurdle of saving up for a house deposit, allowing quicker entry into the market, smaller loans, and a better chance of loan approval.”

He added that buying a home required an incredible amount of planning, research and sacrifice as purchasers had to borrow, work and save more for their loan repayments and stamp duty.

The two-bedroom townhouse at 1A Hughes St, Yarraville is listed with $650,000-$715,000 price hopes.

Not only could it take a school leaver around 14 years to put down a 20 per cent deposit on this home making an average wage, 45 per cent of their income would go towards servicing its mortgage.

The Demographics Group co-founder Simon Kuestenmacher said there would need to be major reform to the housing market in the next 10 years, which will be when high-school graduates might be starting their own family and looking for a house.

“We are now seeing every level of government every party, very much involved in the housing crisis; it’s a story every day of the year,” Mr Kuestenmacher said.

“I think the people that are leaving high school now, they will be the first to see a major benefit of all those changes.

“This is probably one of the worst times right now; mid-20s to late 30s is probably the worst age in the housing market.”

Demographer Simon Kuestenmacher said those leaving high school this year could enter the property market at a good time, if there’s major reform in the market that is.

Prominent buyer’s advocate Cate Bakos said today’s high school kids would be wise to consider what government programs they might be able to work towards accessing so they could avoid decades needed to save a 20 per cent deposit for a house.

In Victoria, schemes for first-home buyers include a $10,000 grant for those building or buying a new residence, an existing federal government scheme in which they guarantee loans for deposits as low as 5 per cent and a stamp duty concession program.

Ms Bakos added that parents in a position to do so also often offered their kids cash or leveraged their own home’s equity and acted as a guarantor to remove the need for expensive lenders mortgage insurance.

Buyer's agent Cate Bakos, pictured with daughter Gabriella, said often parents in a position to do so helped their kids out when it came to their first home purchase. Picture: Mark Stewart

Mortgage Choice Berwick owner David Thurmond said graduates should prioritise travelling and “loving life” after finishing school, but then getting into the property market as soon as they could.

And that most needed to accept their first address wouldn’t be a million dollar home in the inner suburbs.

“Maybe that means you have to move further out so you can find something that’s a bit more affordable and is also a bit more achievable from a deposit perspective because there’s a big difference in a 5 per cent deposit of $600,0000 versus $1m,” he said.

HOW SCHOOL LEAVERS CAN GET A HOME SOONER

– Set yourself a budget.

– Open a high-interest saving account with a solid ongoing rate of at least 5 per cent and put as much money in as possible, then don’t take any out.

– Make your savings work for you by investing, if you are comfortable with the risks.

– Assess your spending habits: don’t pay for things you don’t need or aren’t using, and don’t pay too much for what you do need.

– Consider working a trade instead of going to university as it will most likely get you a home sooner.

– Understand what the cost is of the home you want to purchase and develop a saving strategy.

– Don’t expect the first home you buy to be a dream home, work towards buying a good stepping stone.

– The sooner you get on the property ladder, the better as it means less time chasing a potentially rising housing market.

– Buddy up! Plan to purchase a home with a friend, family member or partner so more than one income can be used to save a deposit and service a mortgage.

– Be across and work towards bank and government schemes, grants and incentives that can help you buy a home.

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