APRA confirms 12-year first home buyer deposit challenge

The challenges facing first home buyers have been laid bare by the Australian Prudential Regulation Authority (APRA) which has confirmed it will take them more than a decade to raise a deposit.

In a submission to the Senate Economics Committee, APRA said that, based on Reserve Bank of Australia (RBA) data, it was estimated it would take 12 years on average for first home buyers to accumulate a deposit to enter the housing market.

It said house prices have continued to grow strongly, with population growth materially outpacing the housing stock in recent years.

“Australian house prices have risen by 7 per cent per cent over the past year, and by more than 40 per cent per cent since the start of the pandemic,” APRA told the committee. “In aggregate, Australian house prices are now more than 5.5 times the average household income, based on RBA data.”

“Against this backdrop, it is estimated to take almost 12 years, on average, for first home buyers to accumulate a deposit to enter the housing market.

“Some banks have reported that lower income borrowers are increasingly under-represented in new lending,” the regulator said.

Elsewhere in its submission, APRA pointed to the fact that, recent years, it has sought to introduce greater risk sensitivity to its standardised capital framework, differentiating between two main types of borrowers: owner-occupied housing loans (which include first home buyers) and investor housing loans.

“For a given LVR, owner-occupied loans are now subject to lower capital requirements than for investors. Banks’ interest rates on owner occupier loans are, on average, 40 basis points lower than for investors,” APRA said.