Houses move further out of reach for first-home buyers compared to units
First-home buyers can get into the market almost two years faster by buying a unit, as the time it takes to save for a house deposit increases, new figures show.
It comes as mortgage stress is getting worse for those already on the ladder, according to a report by real estate firm Domain.
Domain compared ‘entry priced’ houses and units — those priced in the 25th percentile.
The report found the average time to save for a deposit on a unit had dropped by almost two months across all capital cities at the end of 2024, compared to a year earlier.
But the time to save for a house deposit increased by one month.
The findings are based on a first-home buyer couple on an average income, purchasing an entry-priced home with a 20 per cent deposit.
The report found Melbourne was the only capital city to see a drop in unit prices over the last five years, down $12,500 (-2.8 per cent) to an average entry price of $437,500.
Perth is the cheapest city for units at $410,000 on average, but that’s an increase of $145,000 (+54.7 per cent) since December 2019.
Adelaide experienced the steepest climb in unit prices up 78.1 per cent in five years to $463,000.
‘Growing gap between earnings and property costs’
“In the past five years, entry house prices have increased 58 per cent, while unit prices have risen by 27 per cent,” said Nicola Powell, chief of research at Domain.
“Meanwhile inflation surged 20 per cent and wages only grew by 15 per cent.
“This shows the growing gap between earnings and property costs, making it harder for first-home buyers to get into the market.“
Dr Powell said the good news was that some regions were becoming cheaper.
Sydney remained the most expensive city to buy property but the time to save for a deposit had dropped by 15 months on average for an entry-level unit compared to five years ago.
“This is thanks to higher wages, better interest rates on savings, and more stable unit prices.
“On the flip side, Brisbane, Adelaide and Perth have seen longer saving times for both units and houses because prices have risen faster than wages and saving rates,” she said.
The area where it takes the least time to save for a house was Darwin (3 years, 5 months — down two months in the past year), followed by the regions (four years) and Perth and Adelaide (4.5 years).
Mortgage stress builds for couples aged 25-34
The rise in property prices and cost of living pressures have contributed to more households experiencing mortgage stress than five years ago.
Mortgage stress is defined as paying more than 30 per cent of household income on repayments.
In 2019, Sydney and Melbourne were the only places where couples aged 25 to 34 who owned a house experienced mortgage stress.
It now affects all capital cities except Darwin.
The same cohort who own units are experiencing mortgage stress in Sydney, Brisbane and Adelaide.
The most expensive cities to repay a mortgage were Sydney, where owners are paying 57.6 per cent of their income on average, and Canberra at 46.7 per cent of income.
Dr Powell said the drop in mortgage rates, as banks pass on the Reserve Bank’s rate cut will offer “some relief” but said rates remain high.
“The aggressive rate hikes in 2022 and 2023 took a huge toll on mortgage serviceability,”
she said.
“Soaring property prices over the past five years have pushed household debt to new highs.
“Today, the proportion of income needed for an entry-priced house across the combined capitals is 19 percentage points higher than five years ago, with units rising by about 8 percentage points.”
