How long does it take to save for a house deposit?

Whether you’re dreaming of a slick apartment in one of the capital cities of Australia or a rambling house in the country, here’s an idea of just how long it might take you to save a deposit on a home in Australia.

Pick your dream

How long it will take you to save your house deposit depends, in large part, on where you’re looking to buy. If you live in a capital city and the location of your dream home has an average purchase price of $1 million dollars, it’s going to take you twice the time of a more rural (or outer-suburban) area, where average purchase prices are closer to the $400-500 thousand-dollar mark.

The home deposit rule of thumb

As a general rule of thumb, you need to aim for a deposit of roughly 20% of the purchase price of the property. You can save a 10% or even 5% home deposit, but this will generally mean you pay more interest over the years, and there may be more up-front costs associated with the home loan.

If you’re saving as a couple, it will take half the time it takes to save as a single. According to the latest nation-wide Domain Group First Home Buyers Report, first-home buyer couples in Sydney will take around 6 years and 8 months to save the $116,500 or 20% deposit for an entry-level house (around $593K) in Sydney, with single savers taking double that time, at 13 years.

If the property you’re saving for is half that price, you could save your deposit in just three and a half years (if you’re saving as a couple). The report figures were based on the national average income for 25-34 year-olds, and assumed an average savings rate of roughly $10K per person, per year.

Sydney has the steepest property prices in the country, followed by Melbourne and Canberra. If you want to buy in Darwin, Perth or Adelaide, you’re looking at almost half the entry-level price of a home in Sydney.

The general rule seems to be that you put away a fifth, or 20% of your post-tax (net) income into your home deposit account – around $800 a month is the savings average used in the report.

Tips for getting your home deposit quicker:

• Save on rent by either living in a share-house or smaller apartment, as you save.
• If you live in the inner-city, save the $100+ per week it takes to keep a car on the road, by either biking around or renting through a car-share service such as Flexicar, Green Share Car or Car Next Door for a fraction of the annual car-ownership cost.
• Take your lunch to work, skip the Friday night beers once a fortnight or make your own coffee: there’s a possible extra $200 a month into your home deposit account
• Watch your daily spending – see where you tend to ‘fritter’ money away, whether it’s on takeaway coffee or subscriptions to accounts you don’t even use, and cut back where you can. An extra $20 a week into your savings could cut a year off your savings time and get you into the housing market quicker.

General advice disclaimer

The information contained in this document is provided for education purposes only. It has been prepared without taking into account your particular financial needs, circumstances or objectives. You should consider the appropriateness of the information as it relates to you. You may wish to consult an adviser before you make any decisions relating to your financial affairs.