Cost of living: New report claims it's now impossible for median-income first home buyers to save deposit without help

A new report claiming saving for a house deposit is now impossible for median-income first-home buyers is painting a bleak picture for renters.

New research from first home financial services platform, Aera, was released on Monday which showed saving for a first home without help is now impossible for many New Zealanders.

The Aera Time-To-Deposit Index report revealed that median-income first-home buyers who start saving today would never be able to save enough for a 20 percent deposit for an average-valued house.

In Auckland, the 20 percent deposit for the average home remains an impossible dream for any median incoming earning household, without additional support from the bank of mum and dad, the report said.

The numbers suggest that a short-term cooling of the market won't last, as national values have grown at an average rate of 6.58 percent annually over the last 30 years, and only dropped three times over that period.

Assuming the house price value continues at the 6.4 percent growth rate in Auckland, home buyers will be looking at $1 million average house deposit by 2045.

Aera's Time to Deposit report includes crucial factors such as income growth, interest earnings on savings, and the relentless rise in house prices.

The report said despite a recent model suggesting it would take only 9.6 years to save for the average national house deposit from scratch, that would only be possible if the median income earner was earning 9 percent annual compound interest on their savings, and having yearly 8 percent raises in household income.

Aera CEO Derek Handley said he was frustrated by the house price deposit indexes failing to include real-world factors and he wanted to correct the record for first home savers.

"We finally have the data to back up what many have felt for years, that house deposits are slipping out of reach for many people, and only getting more so," Handley said. "The scale of this crisis is beyond what many have imagined, and scrimping and saving is no longer enough without the bank of mum and dad."

Handley added that the report dispels the myth that simple hard work will be enough to get into their first home.

"New Zealanders are being sold this story that if they scrimp and save 15 percent of their gross income in the bank, and work hard they will in 10 or 11 years have enough for a house deposit for an average priced home. That hasn't been true for a long time.

"The fact that first home buyers can't buy a home without outside assistance is a travesty, and fuel for the fires of inequality. From here we need to have practical discussions about alternative ways of saving, and alternative means of raising these deposits."

He said he hopes the report will "drive more urgent dialogue from banks, government, and decision-makers that we need new solutions".

The Aera Time-To-Deposit Index uses publicly available data on household income averages, expected interest earnings on savings, house price growth rates, and median house prices. Unlike other measures, this index factors in deposit size, savings rate, income growth, and the evolving 20 percent deposit target.

Distinguishing Aera's Time-To-Deposit Index from other mainstream measures, the report points out three significant flaws in incumbent models. Mainstream models fail to account for growth in household income, house prices, and savings while a first-home saver is building their deposit.