This is how much Melburnians spend on their house deposits

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Key points

• Melbourne home buyers paid an average home deposit of $94,000 in financial year 2023.
• The highest deposit to value ratio in Melbourne was in Albert Park at 28 per cent. The highest in Victoria was Bannockburn at 28.5 per cent.
• The lowest deposit to value ratio in Victoria was in Merbein at $25,618.

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The median home deposit paid in Melbourne has jumped by more than a third over the past three years, as house prices recover and lucky buyers get access to financial help.

Across Melbourne, buyers paid an average deposit of $94,000 in financial year 2023, online property settlement service PEXA’s Buyer Deposits Report, released on Wednesday, shows.

That is almost 40 per cent higher than the deposit paid in September 2020, as buyers helped by equity in their homes, the bank of mum and dad and government incentives were able to save for higher deposits.

Even though Melbourne’s house prices are below the peak reached in 2021, deposit amounts are still rising, due to cashed up buyers in the market, experts say.

The largest deposits Melburnians were paying are mostly in ritzy, inner-city suburbs where buyers were mostly upgrading, helped by equity in homes they already owned. The figures cover buyers purchasing with a mortgage and exclude cash buyers.

Albert Park buyers topped the list for the largest deposit paid in Melbourne, at 28 per cent of the purchase price. This worked out to a $386,046 deposit, while the median loan there was $1,478,867.

Statewide, the biggest deposit to value ratio was in Bannockburn where buyers paid a 28.5 per cent deposit, or $170,186, albeit on cheaper properties.

Deposits in Beaumaris were $374,000, while Toorak buyers paid $356,086, although some top-end Toorak buyers do not need a mortgage.

The cheapest deposits were in regional Victoria and the outer suburbs of Melbourne.

Buyers in Merbein, near Mildura, paid a deposit of just $25,618, and in Mooroopna close to Shepparton it was $29,364.

PEXA’s head of research, Michael Gill, said even some of the purchasers paying small deposits were facing a tough battle to get into the market as they were less likely to have access to family help.

“Those without government assistance or who are unable to tap into the bank of mum and dad will be locked out of certain markets,” Gill said. “They’ll have to compromise with what and where they want to buy.”

Melbourne households earning a median income and with no access to financial help would take 65 months (or almost 5½ years) to save up for the median deposit paid across Victoria last financial year.

Though first home buyers were being hit, upgraders were also facing challenges, especially as more than half of new borrowers who bought in 2023 – 56.5 per cent – were required to take out lenders mortgage insurance (LMI).

First home buyers who qualify for government schemes are avoiding paying LMI.Credit: Jason South

Even though economists were expecting rising interest rates to affect prices, and the amount of deposit needed, prices were holding up.

“We thought rising interest rates would have a dampening effect on house prices, but the market has recovered even though interest rates are rising,” he said.

Westpac senior economist Matthew Hassan said potential buyers on low incomes, who were most sensitive to interest rate rises, had already been squeezed out.

“That means those on higher incomes, or with higher amounts of equity are making property purchases,” Hassan said.

He said it was also possible that those who had saved during the worst of the COVID-19 pandemic, were now using that extra money to put down a deposit on a new home.

“One other possibility is that the buyers coming through have better deposits because of a combination of things – those getting into the market have higher incomes – so $1.4 million to $1.6 million incomes per household coupled with the nest eggs saved during the pandemic,” Hassan said.

“Looking forward, it raises the question of how sustainable it might be if a buyer without those pandemic savings has to meet a market with a much higher deposit.”

BLVD Finance director and mortgage broker Daniel Koutzamanis said sectors of the market, including first home buyers, were finding it increasingly difficult to save up for a deposit, as house prices rose and the cost of living remained high.

Even so, fewer buyers were needing mortgage insurance because of government schemes like the federal Home Guarantee Scheme which allows buyers to get into the market with a small deposit and no LMI.

“The other thing is LMI waivers that the banks offer to people with specific professions [like nurses or police officers],” Koutzamanis said.

Mortgage Choice Elsternwick’s Christopher Ladley said some buyers were now compromising on what they would buy, especially those who did not have extra financial help, and did not qualify for government funds.

“People are having to be more modest in their buying expectations,” Ladley said. “There are some professional couples that want to spend $1 million on their first home, that deposit for them is $200,000, plus stamp duty and other costs, so I find they need a family guarantor, to save up the cash or to be more modest with their purchase.”

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