By Nina Hendy
The average first home buyer deposit in Australia now tops almost $119,000 – more than the average full-time salary of $94,000. On these numbers, it would take someone 12 years to save up that amount of cash, considering potential interest earned at an average rate of 2.7 per cent.
But can investing your savings help build your deposit faster?
Building a home deposit can be a long grind.Credit: Matt Davidson
Richard Whitten, home loans expert at Finder, says saving for a house deposit is tough given that cost-of-living pressures has forced Aussies to cut back on the amount they save from their pay cheque each week.
“Rising costs and skyrocketing interest rates will see plenty of Australians priced out of the market without financial assistance – a worry felt by thousands of house hunters across the country,” he says.
He urged prospective first home buyers to supercharge their savings. If you qualify for a first home owner grant, this can form part of your deposit. “With millions of first home buyers going it alone, they need every trick in the book to save up a home deposit faster,” he says.
Investing can be inherently risky. That being said, here are some investment options to consider.
Using super contributions. The First Home Super Saver scheme enables eligible buyers to withdraw voluntary super contributions to use towards a home deposit.
Changes are being made to the scheme. From September, first home buyers can have some of their voluntary contributions released to help purchase a new or existing home.
Term deposit. You may want to consider a term deposit as a saving option, which can help grow your savings by around 5 per cent a year and carries virtually no risk. This means your money will be locked away for a period of time, usually between three months and five years.
You’re going to need a minimum amount to open a term deposit, usually around $5000. Bear in mind that you are subject to interest rate movements, and if you need to access your money before the end of the term, you may have to pay a penalty fee.
ETFs. Rather than trying to pick shares yourself, ETFs enable investors to track the performance of an entire index or asset class.
While renewable and clean energy stocks have faced headwinds of rising interest rates, Stockspot founder and CEO Chris Brycki says ETFs typically outperform an average bank account.
Investors should just focus on playing it safe and invest in simple vanilla ETFs that track the entire market, rather than niche sectors. “This is the best way to get exposure to the market and not have to worry about which stocks to pick,” he says.
Shares. Investing in shares can build your wealth over time, but you’ll need to decide what you want from shares – regular income or capital growth. And of course, shares are inherently volatile.
There’s an education centre with information and online seminars on the Australian Securities Exchange, where you can also keep an eye on economic and financial market changes.
Co-investing in property. A potential way to build your investment portfolio is via platforms that let you purchase shares in rental properties.
Companies like BrickX, Covesta and DomaCom purchase a property they believe will grow in value, then divide the cost of the property into shares, which are sold to investors. You view the properties available on the platform and receive a distribution from rental income in line with your number of shares.
There are also co-investment platforms like Investn and Resifund, which lets you join a portfolio of income-producing residential properties with as little as $1000. You will need to keep your money invested for at least 12 months.
Flipping items of value. You might be able to build your deposit by flipping items on online marketplaces.
Melbourne’s Natalie Jarvis has been flipping mostly mid-century furniture online over the past month or two. So far, she has sold more than a dozen pieces of furniture for cash and managed to pocket nearly $5000 in the process.
She’s definitely got an eye for it. She’s currently flipping a unique curved gold couch, which she hopes to sell for $400 more than she purchased it for. It’s one of 31 active listings she has on Marketplace.
Jarvis admits she’s handy with a camera and stages each piece before relisting it for sale. “We’ve been stashing the money in a jar to see how much we can save up,” she says.
Write a detailed ad and include measurements to save time in back-and-forth with potential buyers, and avoid scams by only accepting cash on pickup, Jarvis says.
- Advice given in this article is general in nature and not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
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