Dream or Dilemma? By 2034, the average home deposit in Brisbane could soar to $88k—Can savings keep up?

In the last decade, the cost of stepping into a home has skyrocketed, mirroring the rising tides of property prices across Australia. For instance, in Brisbane, a 5% deposit on an average home has jumped from $24k to $46k—an increase of nearly 92%!

Meanwhile, average household incomes haven't kept pace, with only a moderate rise from $80,704 to around $116,000 annually. This widening gap makes the dream of home ownership increasingly challenging, especially for first-time buyers.

If the trends of housing deposit increases and household income growth over the past decade continue for another ten years into 2034, here’s what we might see:

1. Continued Increase in Home Deposits: If home deposits keep rising as they have in Brisbane, from $24k to $46k (a 92% increase) in ten years, another decade at this pace could potentially push the average 5% deposit in Brisbane to about $88k by 2034.
2. Disproportionate Growth in Household Income: Household incomes, if they continue to grow at the rate observed from 2014 to 2023 (from $80,704 to $116,000 annually, an increase of around 44%), might reach approximately $167,000 by 2034. While this seems like a significant increase, it may not keep pace proportionally with the expected rise in housing costs, especially in metropolitan areas.
3. Impact on Affordability: The widening gap between income growth and home price increases could make homeownership increasingly unaffordable for many Australians. If deposit requirements keep outpacing income growth, fewer people might be able to enter the housing market without substantial financial assistance or innovative financing solutions.
4. Potential for Higher Loan Repayments: If interest rates rise or remain higher than historical lows, future homeowners might face considerably higher monthly mortgage repayments. This could further stress household budgets, particularly if income growth does not significantly accelerate.

This speculative outlook highlights the importance of policy interventions, more affordable housing solutions, and perhaps new financial products that can help bridge the gap between income levels and housing costs. Monitoring these trends can help prospective buyers and policymakers make informed decisions as the housing landscape evolves.