Buyer Deposits CY24 | Regional and outer suburban buyers were the most highly leveraged in 2024

This report examines the corresponding loan amounts with a lender upon property settlement and assumes the difference between the total value of the property settled and the loan amount is the deposit actually paid by the buyer (instead of assuming all buyers pay a 20% deposit). We compare differences across Australia’s three largest states (NSW, VIC and QLD) over January 2020 to December 2024. Lending trends for new loans and refinances by financial institutions will be explored in an upcoming report. 

This report was developed in collaboration with .id (Informed decisions), who are part of the PEXA Group. .id is Australia’s leading provider of demographic tools and consulting services, with more than 25 years’ experience converting data into knowledge of place. Designed for strategy planning and advocacy teams, the housing.id tool combines housing, demographic, economic and population forecast data in one place.

Introduction

Examining buyer deposits allows us to analyse settlement trends for homebuyers across states, capital cities and at the granular suburb level. It provides an indication of how much homebuyers are paying for a house deposit, which areas have the most leveraged homebuyers, and which areas have a larger proportion of homebuyers relying on government support measures (primarily for first home buyers) to enter the property market. 

Owning your own home has been the quintessential Australian dream. But that dream has disappeared, leaving behind a new generation of forever renters who are locked out of home ownership by an increasingly unaffordable property market. These consequences have dire implications for housing affordability, home ownership and the growing wealth inequality between generations and between wealthier and less wealthy households.  

This analysis helps inform decision makers to develop and influence fit-for-purpose housing policy in through a better understanding of their local area.  

Key Findings

1. Lending trends vary drastically by geography

• Deposit-to-value ratios (DVRs) tend to increase with the value of a property – largely influenced by the composition of home buyers when looking at areas with high median deposits, high DVRs, and maximum borrowing constraints. 
• Conversely, relatively affordable suburbs in growth areas of the capital cities attract a larger proportion of first home buyers that want to establish themselves on the property ladder. As such, average loan-to-value ratios (LVRs) are higher in these areas and deposit amounts are smaller. 
• Suburbs with a high average LVR tend also to have a high proportion of loans that would theoretically attract additional lenders mortgage insurance (LMI). Regional towns have dominated the top 10 suburbs with the highest proportion of loans with an LVR above 80%. 

• The relative differences between median deposit amounts in each state largely reflect the relative differences in property values for buyers who require a loan. Other factors, such as the composition of dwellings (high-density units vs detached housing) and the composition of homebuyers (retirees vs first home buyers) also explain differences between the states. See this data and more for your local area using the housing.id tool. 

2. Bank of Mum and Dad becoming a more important source of financing as housing becomes even more unaffordable

• Ever increasing house prices in Australia have become a significant barrier for home ownership for many households. Home ownership is at an all-time low for Australians under the age of 40. In the age cohorts of 25-29, 30-34 and 35-39, home ownership rates sit at just 36%, 50% and 59% respectively. These rates represent a substantial decline from peaks in the late 70s and early 80s, and are substantially lower than the current rates of each higher age cohort, all of which range between 65% and 82% (ABS cited in AIHW, 2021). 
• State and federal demand-side support for home ownership tends to focus on Australian-resident first home buyers. Support measures include a range of tax concessions (stamp duty concessions, land tax exemptions for owner-occupiers), grants (first home buyer grants for new dwellings), ability to draw down on superannuation balances (first home super saver scheme) and government-back shared equity schemes. 
• Despite above measures, the deposit gap is one of the main barriers to home ownership for many Australians. However, inter vivos transfers (a transfer made while the gifter is alive) from the bank of mum and dad (as opposed to inheritances and bequests) tend to reduce relative inequality between generations but increase absolute inequality. Children of wealthier households have an increased probability of receiving a gift, and of receiving a larger gift. For those lucky enough to born into a wealthy household with generous parents, this greatly reduces the barrier to home ownership and allows them to experience the benefits (e.g. wealth accumulation through capital growth) much earlier than an individual born to a less wealthy household.  
• At a local level, the inability of key workers to secure affordable housing close to their place of work may have consequences for the prosperity of the local economy. In the City of Melbourne, a third of the workforce were classified as key workers, and a higher proportion of those key workers earned a lower income compared to the average. Moreover, 86% of these key workers live outside the City of Melbourne and over 40% of travel over 20km to their place of work. 

• It’s no surprise that median deposit values have increased in recent years. Rising house prices post-COVID, coupled with higher mortgage serviceability criteria, has increased the amount prospective homebuyers need to front up before purchasing a home.
• Homebuyers in NSW have the largest median deposit, as expected, given that property is relatively more expensive. QLD has recently overtaken VIC in median house prices and has also overtaken VIC in median deposits. This is related to price rises but also composition differences in housing markets.
• The composition of homebuyers in VIC also helps explain the flatlining median deposit amount. Firstly, median prices in VIC have stagnated over the previous year. Secondly, increased land tax burdens have resulted in an investor sell-off, benefitting eager first home buyers hoping to enter the property market. 

• For an individual buyer earning the median income in each state, it can take more than a decade to save for the median house deposit in the respective state. For buyers in NSW, this could be closer to 20 or 30 years. 

• Unsurprisingly, suburbs where homebuyers needed the highest deposits are all affluent, with multi-million dollar price tags.
• These properties largely consist of waterfront suburbs in Sydney, coastal suburbs in South-East Queensland (SEQ) and leafy green suburbs in Melbourne. 

Deposit-to-value ratio (DVR)

• DVRs increase with the purchase price of a property, so the areas listed in the above map tend to be affluent and desirable, with a matching price tag. Comparing the suburbs with the highest DVR to those with the highest LVRs, the median deposit amounts are multiple times bigger. 

• Suburbs purchased in NSW with a high DVR had a median sale price of around $2 million.
• These suburbs boast waterfront locations and are more than likely to consist of luxury homes. Buyers in these areas are likely to have upgraded from their first home.
• A minimum deposit of half a million dollars is needed for a home loan for these areas. 

• Similar to NSW and QLD, buyers for properties in this VIC list favoured beachfront postcodes, most postcodes featured are located around Port Phillip Bay, such as Beaumaris, Brighton in the metropolitan Melbourne and Mount Eliza, Mount Martha and Mornington. Properties is these areas are largely unattainable for households earning an average income, with only 1.8% of all sales in Mount Martha and 3.7% in Beaumaris were considered affordable for those households.
• This implies that those purchasing these homes have the assets and cashflow are able to service the mortgage that buying one of these home demands.
• Castlemaine is the only regional town that made the list – a popular place for tree-changers due to the amenities and quality of life.
• The highest average DVRs were recorded in Lower Plenty, a green suburb in the Yarra Valley with larger blocks of land. 

• SEQ dominates entries on this list. The QLD property market has been hot lately, especially compared to its southern counterparts. Demand for beachfront properties in south-east QLD remains high. For example, In the 5 years ending June 2024, median house prices have increased by an average of 12.3% per annum in Sunshine Coast Council compared to an increase of 7.3% per annum in Regional Queensland.
• Cotsword Hills and Burrum Heads stand out as an exception, with a median property sale price of $240,000 and $276,000.

Loan-to-value ratio (LVR)

• LVRs have trended downwards since COVID. Under the current mortgage serviceability buffers, banks are to ensure that borrowers would be able to service their loan if interest rates rise by a further 3%. 

• The analysis of suburbs with the highest average LVRs reveal a trend in NSW and QLD for cheaper homes in the regions that may be looked at as entry points for those unable to afford property within the major cities. Buyers looking to buy purchase a regional property can establish themselves on the property ladder much earlier than if they were to buy in the cities. Lenders may also be more tolerant of more leveraged loans, given the total loan values are relatively small.
• Census data indicates the median age in these suburbs is fairly young, in contrast to the postcodes featured in the Cash Purchases report, which had an older demographic. 

• Compared to VIC and QLD, a lot of regional suburbs had a very high LVR. The housing market in Sydney is the most unaffordable in the country and is often named in lists featuring the most expensive cities in the world. Younger households and first home buyers that want to enter the property market but remain in NSW may be drawn to these regional towns, with property available at a much more affordable price point.
• These regional towns with the highest average LVRs have a relatively high level of  
  socio-economic disadvantage. As such, property prices are low and may attract homebuyers with limited borrowing capacity. For example, in Tamworth LGA, the low Social-Economic Index For Areas (SEIFA) score is explained by a lower proportion of high income earners, a higher proportion of residents without any qualifications and a higher proportion individuals aged 15-24 disengaged with both employment and education. 

• Growing suburbs in Melbourne’s outer suburbs feature heavily in the top-10 LVR list: Cobblebank, in Melbourne’s north-west, Hampton Park, Cranbourne and Cranbourne North in Melbourne’s south-east, Seabrook in Melbourne’s south-west and Kings Park in Melbourne’s west.
• Woodstock is a growth area in the Whittlesea local government area (LGA). Nearly all new loans were for vacant land.
• Red Cliffs, a regional town south-east of Mildura, is the only regional locality on this list.  

• There is an abundance of suburbs in Brisbane (Spring Hill, Goodna, Kingston, Eagleby, Logan Central, Slacks Creek) and in Townsville (Heatley, Rosslea, Currajong) that have recorded a high average LVR. As reported in the 2021 Census, those migrating to these areas were likely to be aged 25-44. 

Lenders Mortgage Insurance (LMI) 

• LMI is theoretically required for mortgages with an LVR above 80%. However, potential homebuyers can bypass LMI by either having a guarantor or participating in the First Home Guarantee (FHBG), available to first home buyers and is supported by many financial institutions.
• The suite of state and federally funded demand-side subsidies, grants and concessions, from stamp duty concessions to shared equity schemes, enable first home buyers to purchase a home with a much smaller deposit and reduces the amount of time they need to save.
• Suburbs with a larger share of new loans requiring LMI are likely to have a larger share of first home buyers and are also likely to be featured in the above lists for the highest LVRs.
• Certain professions, such as medical and law professionals, can be offered a LMI waiver if these homebuyers choose to finance with certain financial institutions.
• Although the cost of LMI is borne by the borrower, the insurance covers the lender. The cost of LMI increases with a borrowers’ LVR and can cost 1-5% of the total home loan amount. For example, a borrower purchasing a $500,000 property in VIC with a LVR of 95% can expect to pay around $17,000 in LMI.

• The share of loans requiring have been trending downwards post-COVID, due to borrowers being assessed to a higher serviceability criteria since the interest rates have increased.
• VIC has a higher proportion of loans that theoretically would require LMI in recent years, suggesting structural differences between the state property markets. Anecdotally, the investor sell-off has largely benefitted first home buyers, who have been able to enter the market. 

• Homebuyers in the regions tend to have a lower median deposit, higher DVR and therefore, a low share of loans that would theoretically require LMI. This is due to relatively lower property prices and the composition of buyers (e.g. retirees) in the regions.
• Younger people and families needing to establish themselves on the property ladder would buy affordable properties in growth areas.

• There is a lot of overlap between the top 10 suburbs for the highest LVR and the top 10 suburbs for the proportion of loans with a LVR higher than 80% and would theoretically require LMI.
• In NSW and VIC, a lot of these suburbs are in the regions, but only a few have a high proportion of settlements for vacant land. 

• In NSW, Grantham Farm is a suburb in Blacktown LGA, in Sydney’s west – is expected to nearly double in population in the next 20 years. There is a still some level of residential development in the area, given that a quarter of new loans were for vacant lots.
• The top 10 suburbs in VIC that are within Greater Melbourne are known as relatively affordable suburbs still within commuting distance of the Melbourne CBD. Lucknow, and the surrounding suburbs in the Latrobe Valley, is expected to grow by whopping 27.2% over the next 20 years. Interesting, a few suburbs on the VIC-NSW border such as Baranduda (near Wodonga) and Swan Hill, make this list.
• In QLD, all suburbs other than Benobble did not record a notable number of land settlements and many suburbs in Cairns (Mount Sheridan, Earlville, Westcourt, Mooroobool, Manunda) made this top-10 list.  

Definitions 

The transactions examined in this report include residential property purchases valued over $10,000 that were funded with a single home loan in 2024. We have excluded: all commercial property; all purchases that have multiple home loans from different lenders associated with them; and all situations in which a single home loan is taken out to fund multiple property purchases. Our calculation of deposits excludes the transaction costs borne by buyers (such as stamp duty, legal costs and agent fees) and excludes any first-home buyer or other subsidies that may have contributed to the buyers’ funds. 

Median deposit value: The median loan amount is taken from the loan proceeds used in the property settlement on the buyer side. The average loan amount is reported for all residential property settlements with a new loan. It should be noted that the total loan amount issued by the lender may differ from the loan amount used in our calculation. This would be the case, for instance, if a buyer borrows additional funds, beyond what was required to fund the purchase. For example, if a buyer requires $400K to settle the purchase of a property (after accounting for any deposit), but decides to take out a loan for $450K with the intention to use the additional $50K for future renovations, our calculation would use the $400K loan proceeds used in the initial settlement and not the $450K total loan amount. 

Loan-to-value ratio (LVR): The Loan-to-value ratio (LVR) is calculated by comparing the loan amount used to fund the purchase of a property against the total sale price, expressed as a percentage. For instance, if a buyer borrows $400K to purchase a property valued at $500K, the LVR would be 80%. The average LVR (mean) is reported for all residential property settlements with a new loan. It should be noted that the total loan amount issued by the lender may differ from the loan amount used in our calculation. This would be the case, for instance, if a buyer borrows additional funds, beyond what was required to fund the purchase. For example, if a buyer requires $400K to settle the purchase of a property (after accounting for any deposit) but decides to take out a loan for $450K with the intention to use the additional $50K for future renovations, our LVR calculation would use the $400K loan proceeds used in the initial settlement and not the $450K total loan amount. 

Deposit-to-value ratio (DVR): The DVR is the total cash funds contributed by buyers to settle the property, expressed as a percentage of the property value. For instance, if a buyer contributes a $50K deposit to settle their property purchase of $500K, the resulting DVR would be 10%. The DVR and LVR for any given settlement sum to 100%.  

Lenders Mortgage Insurance (LMI): LMI is a requirement for borrowers with smaller deposits and is designed to protect lenders against the risk of default. The LMI premium is based on the size of the deposit and is added to the loan amount, increasing loan repayments for the borrower. In this report, loans with a LVR greater than 80% are classified as requiring LMI. Although borrowers bear the cost of LMI, the lender is the one insured in the scenario that the borrower is unable to meet its loan repayments. 

Time to save: The time it takes for an individual (as opposed to a couple) to save for the median deposit amount in each state. Personal income data from the Australian Bureau of Statistics (ABS) is grown by the wage price index (WPI) to estimate the current median yearly income. Savings are calculated assuming a savings rate of 10%, 15% and 20% of the median post-tax income. 

For further enquiries about this report or other property and mortgage insights, please contact us at research@pexa.com.au. 

About .id (informed decisions)  

.id (informed decisions), part of the PEXA Group, is Australia’s leading provider of tools and consulting services that empower confident and strategic local and national decision-making. Our unique analysis and models unlock detailed, evidence-based stories covering demographic, economic and social trends, plus the forecast of population, housing and land supply across Australia. 

This independent evidence is built on a breadth of expertise and local area research to help our clients understand local areas in their regional and national context. .id has been trusted by the private sector, local and state government for over 25 years, to provide impartial evidence to inform place-based decisions. 

.id have over 25 years of experience working with local government and industry sectors. To learn more about .id’s data and services, visit id.com.au. 

For media enquiries, please contact:  

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