Property prices: You need a $100K deposit in every capital city – except this one

Posted: 16 June 2021 10:00 am
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Saving a 20% deposit for the median priced property in most Australian cities is a 6-figure task.

With Australian property prices rising 2.2% last month, the amount borrowers need to scrape together a deposit has jumped even higher.

Finder analysis of the latest price data from CoreLogic shows that the median property price in every capital city has passed $500,000. The only exception is Darwin, where the median sits at $478,072. At this price, a buyer would need to save $95,614 to make a 20% deposit.

It's the only Australian capital where a 20% deposit costs less than $100,000.

The results in other cities provide grim news for hopeful home buyers. A 20% deposit in Sydney is almost $200,000, while Melbourne and Canberra are just shy of $150,000.

The table below shows the full analysis. We've taken median price figures rather than averages, because these represent the "middle" of the market without multi-million dollar homes skewing the numbers upwards.

Australian median property prices and deposit sizes

CityMedian priceDeposit (20%)Deposit (5%)
Sydney$970,355$194,071$48,517
Melbourne$740,562$148,112$37,028
Brisbane$574,572$114,914$28,728
Adelaide$500,881$100,176$25,044
Perth$521,688$104,337$26,084
Hobart$574,543$114,908$28,727
Darwin$478,072$95,614$23,903
Canberra$746,573$149,314$37,328

Source: CoreLogic Hedonic Home Value Index, May 2021

The table also shows what a 5% deposit looks like. Smaller deposits are much more achievable, but come with added lender scrutiny and costly lenders mortgage insurance (LMI).

Buyers looking for cheaper regional cities are running out of options too. CoreLogic research director Tim Lawless said that values were up for units and houses "across the board" in 97% of the sub-regions, the data firm analyses.

"Such a synchronised upswing is an absolute rarity across Australia's diverse array of housing markets."

The good news for home buyers is that home loan interest rates are so low right now. This makes loan repayments cheaper than they might be otherwise. But it's not much help when you need to save a 6-figure deposit and borrow so much.

Of course, home buyers don't need 20% deposits in order to enter the market. Many lenders will accept 10% deposits, or even 5%. But any deposit under 20% comes with the extra cost of LMI premiums.

LMI protects the lender in the event you can't repay, and can add thousands or even tens of thousands of dollars to your loan. The more you borrow and the smaller your deposit, the higher the LMI premium.

Let's look at a worst case scenario in Sydney.

In this case a 5% deposit sets you back almost as much in premiums. Of course, you can borrow LMI along with your loan. In the example above that would add $737 a month to your repayments.

Buyers who want to skip saving a gigantic deposit and avoid hefty LMI premiums have two options:

  1. Use a guarantor. This only works if your parents really trust you and own their own home. By acting as loan guarantor, the home owner uses the equity in their property to back your small deposit. This satisfies the lender, and in return the lender waives LMI.
  2. The First Home Loan Deposit Scheme. This federal government scheme works like the parental guarantor option above, but with the government acting as guarantor. You can save a 5% deposit and borrow the rest while avoiding LMI. Places in the scheme are capped and you need to be a first home buyer who is building or purchasing a new home.

Looking to enter the market? Work out how much you should save for a deposit and read our tips for actually saving up the money.

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