How many work hours does it take you to save for a house deposit?
Have you ever worked it out?
It is both interesting and depressing at the same time.
Understandably, there is an almost infinite number of variables for this calculation, most of them around wages and household expenses.
Let us give it a shot anyway…
Wage – $1,750 (average weekly wage according to ABS, 38-hour week – $91k annual)
Tax – $385 week
Medicare – $35 week
Take home – $1,330 week
Saving 15% – $199 week (studies show Aussies save between $427 and $854 per month)
Saving – $10,374 year
Ave house – $700,000 (varies from Mid $400’s to over $1m Australia wide average)
Deposit – $70,000 (anything from 5% to 20% plus costs, I used 10%)
Results
Years to save 6.7
Weeks to save 350
Hours worked 13,300 (of which 2000 hours are used to save the actual money for your deposit)
6.7 years to save for a deposit!
As mentioned above, there is a large range of variables for this, like wages, expenses, house price etc.
To summarise, it takes the average Aussie 13,300 work hours to save a 10% deposit on the average Aussie home, while earning an average Aussie wage.
Why is this important?
Obviously, this is a large number and small changes to savings rates, expenses and wage will make huge differences to the dollars saved, and therefor the time taken to compile your deposit.
First homeowner grants could also be expressed in the same manner. A $25,000 leg up from the government will equate to a 125-week saving, (2.4 years or 4761 hours at work!).
Assuming for a minute these ‘average’ figures are even close to be accurate, I want to now look at how house price rises translate into work hours.
According to various articles, the forecasted national average annual price growth for property over a 10-year period ranges from 2% to 10%. Every suburb is different of course, but a conservative number I will settle on is 3%, it has been much higher.
For our average house value of $700,000, this means a value increase of $24,000. Again, on our averages above, this translates to a 2-year work time or 4000 hours.
Too unrealistic?
Let’s say your home value increased only by the average amount you can save each year, $10,374. This rise equates to a percentage increase in your homes’ value of 1.48%
Let me put that another way.
Your average home only needs to increase by 1.48% this year, to equal your whole savings ability for 2021.
That is a bit daunting really.
Especially when the 25-year average price growth each year has been 6.8% for houses and 5.9% for units.
At 6.8%, your average home is rising by $47,600 this year, or 4.58 years, 238 weeks, 9066 hours, of work savings.
All in one year!
The average Aussie works 1,976 hours each year, but their average house might be working the equivalent of 9,066 hours this year.
Your home is working 4.5 times as hard as you are!
The question isn’t;
Can I afford to be in property?
Rather, the question is;
Can I afford to not be in property?
Since 2004, Scotty North has been helping people buy the best properties for their needs at prices that simply speak for themselves.
Scotty has been instrumental in bridging the gap between financial planning and traditional real estate transactions through his property advice model.
Scotty North is a Qualified Property Investment Advisor (QPIA), with accreditation’s in financial planning, mortgage broking and real estate.
By carefully considering his clients’ goals and planning for market changes via demographics and trends, Scotty designs a future proof outcome not only specific to the client’s needs but dynamic in its execution with performance indicators and exit strategies built in.