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Top 5 tips to save for a property deposit when borrowing power shrinks
Higher interest rates and tighter lending have squeezed borrowing power, but with the right strategy, investors can still fast-track their next property deposit.
Elevated interest rates, stricter borrowing conditions, and rising living costs have made it harder for Australians to save for their next property.
According to Strategic Brokers director Hung Chuy, while the recent rate hikes and changes in property taxes have slightly reduced borrowing power for many first home buyers, investors have taken a significant hit.
He said that investors with multiple properties have been hit much harder as higher repayments across existing loans continue to weigh on serviceability.
With living costs rising and government tax changes adding further pressure, Chuy said investors can no longer afford to let savings sit idle, particularly as property values in many affordable markets continue to move higher.
“With vendors’ confidence decreasing, you have an opportunity to negotiate and get a property at a really fair price, but you need the funds.”
Chuy said that having a clear strategy to save a deposit was just as important as buying the right property.
Here are his five tips to help investors build a deposit faster:
1. Use AI to uncover where your money is really going
According to Chuy, most Australians could save more money each month if they knew where they spent it.
He said that to have a clear picture, prospective buyers could use AI as a budgeting tool to categorise spending from bank statements, making it easier to identify unnecessary expenses and redirect them towards a deposit.
"You could drop your bank statements in an AI tool, and it will break it down for everything you’re spending without you having to go through the details yourself."
“Am I eating too much avocado? Am I spending too much on Uber Eats? How many Uber rides have I taken that weren’t necessary?”
Rather than focusing on the occasional coffee, Chuy said investors should look for the higher recurring costs that have the biggest impact on their savings.
Once spending has been categorised, Chuy said it becomes much easier to identify what can be cut back.
"Once you actually see the figures, you can then analyse them and go, well, where can I take away some of these expenses? What’s absolutely necessary and what’s not necessary?"
2. Make your savings work harder
After reviewing their spending, Chuy said buyers should turn their attention to maximising their savings, rather than leaving cash sitting idle in a transaction account.
He said many Australians overlooked the importance of earning interest on their savings, despite compounding providing a simple way to accelerate their deposit.
"Compounding interest is very important. Some people don’t even realise they’ve just got money sitting in a bank account that’s getting no interest."
He encouraged buyers to compare savings products and take advantage of reward saver accounts or introductory offers where appropriate.
3. Set a target and reverse engineer your savings plan
According to Chuy, saving without a clear target often makes it harder to stay on track.
He said buyers should first determine exactly how much they need for a deposit, then work backwards to calculate how much they must save each week or month to reach that goal.
"Work out backwards from there how much your target goal is and what you need to get to."
He said that having a defined goal also helped create a realistic timeline and made progress easier to measure.
"You’ll know exactly what to save and know exactly what timeframe you need to get there by."
4. Speak to a broker sooner rather than later
While many aspiring investors assume the only way they could enter the market was by saving a larger deposit, Chuy said that wasn’t always the case.
He said that by speaking to a broker early, buyers could uncover lending pathways they had no idea existed, such as government schemes or guarantor arrangements, allowing them to purchase sooner rather than chasing rising property prices.
"If you haven’t spoken to a broker, at least go and have that conversation. Explain to them what you’re trying to achieve."
Chuy said many buyers were surprised by the options available once they sought professional advice.
"People don’t actually realise that these things exist and they’re saving, but actually, the rate that the properties are going up, they’re missing out and getting in early."
5. Know what you’re saving for
According to Chuy, building a deposit was only part of the equation.
He said that before entering an aggressive saving phase, buyers needed a clear understanding of the type of property they were working towards, helping them determine both their savings target and their long-term wealth strategy.
He encouraged investors to continue educating themselves, understanding the market and focus on quality assets that can become stepping stones to future purchases.
"It’s really important to get into the right property."
For buyers considering units, Chuy suggested looking beyond large apartment towers and focusing on boutique apartments.
"Try to avoid buying into high-rise multi-unit dwellings, looking at smaller blocks of units if units are where you can afford."
With affordable markets continuing to record strong price growth despite economic headwinds, Chuy warned against waiting too long to make a move.
"Those markets are trending or moving very fast at the moment, so don’t hesitate. I think just make sure you start making these decisions quickly."
Additionally, he said that softer market conditions were creating opportunities for buyers prepared to negotiate.
"Don’t be afraid to put offers out there because if you don’t ask, you don’t get."
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