Buying your first home is becoming more and more difficult. The Housing Industry Association’s affordability index, fell by 6 per cent in June quarter of 2008. This index is an indicator of how affordable it is to buy your first home in the current property market. The index is around 10 per cent lower than what it was a year ago. The rising interest rates and the rising rents are two main reasons for the fall in the affordability index.

For your first home the ideal deposit would be around 20% of the purchase price. If you can’t save up to 20% then anywhere upwards of 10 per cent should do. The higher the deposit, the higher your savings in the long run. Otherwise you will end up losing thousands in interest payments.

If you have already started saving for your first property then you are on the right track. If you have not then stop complaining about the rising costs and start saving today.

Here are some tips on how to save up a good deposit amount for your first home:

Start A Budget

This is the only way you will have complete control over your finances. With the help of a budget you can identify areas you can cut down your expenses. You cannot reach your savings target if your expenses stay at the current level. You need to make some sacrifices. And a budget will help you with that.

Clear Debts

Clear all your credit card and other high interest debts. There is no point saving up for a deposit when you are paying high interest charges on your existing debts.

Set Targets And Goals

Sit down, analyse your finances and arrive at a realistic figure for your first home purchase price.


Determine how much deposit you need for this house. Add the other property purchase costs (like conveyancing, building inspections) to the deposit figure.


Your aim has to be able to save for deposit for this house in two to three years time - not in the next 10 years.


Use a calculator and determine how much you need t save every month to reach the target deposit figure.

Start A First Home Savers Account

Make full use of the Government subsidies and contributions and start the first home savers account today.

Start A Savings Plan

All your savings should not be going into First Home Savers Account. The Government will contribute 17% of the first $5,000 contributed annually by the account holders. And this $5000 is indexed (so it will keep changing every year). Find out what the current year’s limit is and only invest that much into the First Home Savings account. There is no point investing more than that.

Start a cash management account or some other high yielding interest account for your remaining savings. Make sure the amount gets debited automatically from your transaction account every month. A word of caution - don’t open a account with high risk - I prefer a moderate or low risk account.

Be Disciplined

This is probably the most important piece in this puzzle. If you lack the discipline no amount of goal setting can help you. If you are going to be lax about the whole thing then you are going to find yourself in the same situation you are in today even ten years from now. Would you want that?

I am glad that I bought my first property ten years ago. I feel for today’s first home buyers. It was definitely much easier during my time. Having said that, you can’t use today’s market conditions as an excuse. You need to get your finances in order and start saving today. The affordability index might never get back to the level it was ten year ago.

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