9 hours ago
It could take almost a decade for the average Victorian renter who puts aside 20% of their gross income to save enough money for a home deposit in 2035, according to analysis from the state’s independent Parliamentary Budget Office.
But if rents were to increase in line at the historically high rate seen in 2022 and 2023, the time needed to save for a deposit could blow out to over 65 years.
The findings are from a report by the PBO, being released Friday, which was commissioned by the Victorian Greens as they continue to push the state government to introduce rent controls.
The report estimates the time required for an average household of renters, aged 25 to 34, to save a 20% deposit on a median-priced home, based on a methodology also used by the Reserve Bank of Australia.
It said currently would take a household 6.4 years to save enough for a deposit on a $755,000 home if they put aside 20% of their pay. This has increased by 19% since 2019, when it took 5.4 years.
However, if rents continue to rise by 4% per year – reflecting the trend of the past decade – the time to save for a deposit will increase to 8.3 years by 2035.
“This reflects house price growth (5.5% per year) outpacing household incomes growth (3.1% per year),” the report said.
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The report was prepared before Corelogic data suggested Melbourne rents had fallen over the past six months. PropTrack this week also recorded a slowing of growth in Melbourne rent prices.
According to the PBO report, if rents grew at the same rate as they did in 2022 and 2023 (12.4% annually), the time to save for a deposit would balloon to 65.6 years by 2030.
“By 2030, households would spend almost 20% of their gross household income on additional rental costs … effectively meaning the rent increases have eroded their savings to the point they could not save a deposit,” the report reads.
“By 2031, households would have no savings available.”
But the report said this alternative scenario would be “unlikely” as weaker migration and expected interest rate reductions ease pressures on rental prices.
The report also outlines two scenarios put forward by the Greens involving rent controls. It found if rents were frozen for two years and then increased by 2% every two years, the time to save for a deposit would shrink to 5.9 years by 2030.
If they grew annually at the same average rate as the consumer price index (2.7% per year), it would further reduce to 5.3 years.
The state Greens’ spokesperson for renters rights, Gabrielle de Vietri, said the report proved it was “basically impossible” for renters to save a deposit.
“If you’re renting right now, you’re probably struggling to pay for groceries, let alone a house deposit,” she said.
“Without rent controls, the possibility of that ever materialising into a home of their own becomes a distant dream.”
Renters’ rights are expected to be a central issue in the Greens’ byelection campaign in the seat of Prahran, where the party’s candidate, St Kilda East local Angelica Di Camillo, is facing a challenge from the Liberal candidate, Rachel Westaway. Labor has chosen not to field a candidate.
According to the 2021 census, 57% of the electorate were renters and 61% were aged under 40.
