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Sep 30, 2020

How long does it take a typical young couple to save a deposit to buy a first home in the current environment?


The answer is: Less than a year in most of our capital cities and less than 18 months in Sydney.


But you wouldn’t know it if you’ve tuned into the headlines over the past week, in the wake of another piece of bogus “research” generated by a publicity-seeker.


Media treatment of this “report” would have us believe it takes over six years for the typical young couple to save a deposit.


How did we arrive at this disconnect between reality and media perception? Because nobody in the process gives a damn about being helpful to people. The only objective is the headline.


Media loves a story declaring young Australians can’t afford to buy – or that the road to home ownership is impossibly long and arduous.


The reality contradicts the notion that young individuals and couples are priced out of the market, but journalists will never let the facts get in the way of a clickbait headline.


And their desire to publish dire scenarios is fuelled by apparently credible research organisations whose motive is to generate publicity.


The headlines in the past week claimed it took first-home buyers over six years to save a deposit to buy a home. I saw reports in major newspapers, on television news bulletins and in online news services.


One headline shouted “FHBs bearing heavier deposit burden” and another said “FHBs take six and a half years to afford their first home”.


For the source of the report, it was mission accomplished. They got the publicity they wanted.


In each case, the figures from a press release were recycled as fact without question or scrutiny. Such is journalism in modern Australia.


The headlines were based on a scenario that has no relationship to the reality for most young Australians. The headlines – and the report that generated them – were based on the notion that typical first-timers need a 20% deposit, that they must buy a house rather than a unit, and that they’re buying in Sydney or Melbourne.


For nine out of 10 young adults wanting to buy their first home, that scenario is not their reality.


A more likely situation is a 5% deposit to buy a lower-priced home, possibly an apartment, in Brisbane or Perth or Ballarat or Wollongong or the Sunshine Coast – or a block of land to build a new home with the help of the HomeBuilder grant.


The reality is that first-home buyers are having a feeding frenzy in real estate markets across Australia. They comprise the most active cohort in the housing market.


This is showing up in the lending figures, in the sales data and in anecdotal evidence from people at the coal-face of markets across the nation.


I would argue there’s never been a better time to be a first-home buyer in Australia, provided you have secure employment.


Interest rates have never been lower and the level of government assistance has never been higher. Investors are largely dormant so first-timers are not having to compete with investors as much as before.


You can borrow cheap from banks who want your business, particularly with the recent relaxation of the lending rules.


You can pocket incentives from federal and state governments - and get into your first home with an ease that has never existed before.


Because of one federal scheme, you need only a 5% deposit. Thanks to another, you can get a $25,000 handout to build a new home.


State assistance schemes provide more handouts. You can borrow with an interest rate that starts with a 2. And you’ll pay little or no stamp duty.


Aussie Home Loans data suggests that home loan pre-approvals have grown 71% since the start of the year and over half of all pre-approvals are for the first-home buyers.


Research published earlier this month indicated that, in most locations across Australia, it’s now cheaper to buy than to rent.


And yet media of all kinds have gone ballistic with claims that first-home hopefuls are having to save for over six years before being able to contemplate looking for a home.


It was all based on a typically bogus research report from Domain, a supposedly credible research source.


They managed to come up with a negative scenario by doing what research like this always does: focus on how long it takes to save a 20% deposit to buy a house in the nation’s most expensive cities.


The scenario presented was irrelevant to most young people seeking to buy a first home.


How about presenting a realistic and relevant scenario? How long does it take to save a 5% deposit to buy a house in the lower price ranges in Perth – or Brisbane or Hobart?


How long does it take to save a small deposit to buy an apartment in Adelaide or in a middle ring suburb of Melbourne? Or a home in Bendigo or Wagga Wagga or Launceston or Mackay.


These are the places where most Australians live.


And the answers are …


  • If you’re the typical young couple buying an entry-level unit in Brisbane, it takes just nine months to save a 5% deposit.
  • In Perth, it would take only seven months and in Darwin just five months to save the necessary deposit.
  • Even in Sydney it takes only one year and four months to save the necessary deposit for an entry-level unit. And 12 months in Melbourne.
  • For those who prefer houses, they can save a 5% deposit for an entry level home is in a year or less in Adelaide, Perth, Hobart and Darwin. In Brisbane and Canberra, it’s slightly more than a year.
  • In Sydney and Melbourne, the typical young couple can get together the required deposit to buy an entry-level house in around 18 months.


That information, I should point out, was contained within the Domain First Home Buyer Report. But it was buried in the detail and given no emphasis in the analysis, or the press releases pumped out by Domain, or by media that lapped up the material that WAS highlighted – i.e. it takes six or more years to save a 20% deposit for a house in our two biggest cities.


Why? Because the headline is the thing. And the truth is optional.


Because businesses like Domain are not driven by a desire to be helpful to consumers. They’re driven by a desire to generate publicity.


And media is happy to play along, because journalists care even less about helping their customers. It’s simply not how they think.


Sad but true.