Average first home deposit hits $120,000 - how to get there

Property values may be falling in some of our major cities, but according to Finder's recent First Home Buyer Report 2022, the average 20% deposit has reached a whopping $119,560. That’s almost one-third more than Australia's average full-time salary of $90,916.

The surge in property prices in 2021 is behind the rise, which has seen the average first home buyer deposit jump by $11,700 over the year to March 2022.

The Finder research found it takes the average buyer 2-5 years to save the necessary pot of cash. More than a third (36%) of first home buyers take at least five years to save a deposit. For others, saving to buy a first home has become a decade-long exercise.

With this sort of timeframe, it can be worth looking at ways to supercharge your deposit.

Using a savings account may be a good idea if you have a reasonably short buying horizon. Ongoing savings rates have improved to as high as 2.0%, and term deposits are as high as 3.75% if you are willing to lock up your money for 24 months.

If you have a longer timeframe of five-years-plus, exchange traded funds that invest in a broad basket of underlying shares have the potential to deliver higher, tax-friendly returns. While past returns are no guide for the future, over the last five years Australian shares have notched up total annual returns (dividends plus capital growth)  averaging 6.7% annually.

There is also the option of the First Home Super Saver (FHSS) scheme. It lets you make voluntary contributions to super – up to $15,000 each financial year, that can be accumulated in super’s tax-friendly environment, and later withdrawn to be used as a deposit on a first home.

The Federal Treasury says the FHSS can boost your deposit by at least 30% compared to using a normal savings account. The catch is that from 1 July 2022 you can only save up to $50,000 through the FHSS. So this option may only comprise part of your home-buying deposit rather than all of it.

It also pays to be certain you plan to buy a property. If you have a change of heart, your FHSS contributions could be tied up in super until you retire, or you may be asked to pay tax of 20% on any FHSS funds withdrawn that don’t go towards buying a first home.

Investors tell us saving for their first property is one of the main reasons they open an InvestSMART Professionally Managed Account. They also tell us buying that property is the main reason for closing an account too. Click here to see how long it may take you to save for a deposit. 

Paul Clitheroe is Chairman of InvestSMART, Chair of the Ecstra Foundation and chief commentator for Money Magazine.