First homes more affordable than five years ago, says RateCity

By Terry Ryder, 18th August 2011

Australians have better prospects of saving for a first home in 2011 than five years ago - and especially compared to two years ago.

Financial comparison site RateCity says the national average house price is relatively unchanged compared to 2006 (based on RP Data figures), but incomes have risen steadily.

RateCity CEO Damian Smith says: "Buying a home and paying off a mortgage, something most Australians strive for, got much harder towards the end of 2008, but since the global financial crisis affordability has improved, due to lower housing prices and continued income growth for most Australians.”

Smith says the average Australian home now costs $417,500, similar to the average of five years ago. Median household income in Australia continues to rise - at an average annual rate of over 7% since 2006. Median household income in Australia now sits at just under $77,000, compared to just over $54,000 in 2006.

"It's certainly true that the rich have got a lot richer in Australia over the last few years - but middle Australia is doing better on the income side than some of the doom-and-gloom stories might suggest," says Smith. "The average household is now bringing in around $6,000 more than they were two years ago and almost $23,000 more than in 2006."

Reinforcing that, the latest ABS data shows that total hourly rates of pay, excluding bonuses, rose 0.9% in the June Quarter, with the wage price index up 3.8% from a year earlier.

Because of recent declines in property prices and consistent income growth, Australians are in a better position to save for a typical 10% home loan deposit than two years ago, according to RateCity. A 10% deposit in 2009 (on average) was just over $48,000, whereas in 2011, the equivalent figure is just under $42,000.

Smith says there are greater incentives to save for a mortgage deposit now too. "If you've got money to invest towards a home loan deposit it's a better time to save now than in 2009 because savings interest rates are higher and there are now more attractive savings incentives for first home buyers,” he says. "Average online savings account rates in early 2009 were as low as just over 3%, versus the current average of nearly 5%.  In addition, the First Home Saver Account scheme is more generous than it was a few years ago, although it is still too complex for many prospective buyers.

"That, combined with higher incomes on average, means borrowers today are in a better position to save larger deposits and ultimately shave thousands of dollars interest off their future mortgages."

These figures are averages, Smith says, and Australians in some locations are finding it much tougher.

ENDS

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