Buyers need to save thousands of dollars extra every week to keep up with rising property prices

Potential home buyers who have spent the summer searching for a property would need to save thousands of dollars extra every week in deposit money to keep pace with soaring home prices – a daunting task.

Auction prices have boomed to historic highs in the two biggest capital city markets with Sydney and Melbourne continuing to record strong clearance rates as nearly all the homes for sale each week are snapped up.

The growth is fuelled by ultra-low interest rates – and the expectation rates will stay low for years – along with government grants and a fear of missing out.

In Sydney, the median price for houses sold at auction jumped more than $100,000 in March alone to a record $1.755 million, Domain data shows.

That’s an eye-watering increase of $265,000 since December.

Someone who had a 20 per cent deposit in December but did not manage to buy would have needed to save an extra $53,000 since then to maintain the same level of deposit – a must for avoiding lender’s mortgage insurance.

That would mean saving a whopping $4400 a week.

Not all homes are sold at auction, and others available for private sale may not command such high asking prices. But homes are often taken to auction when a real estate agent expects competition from at least two potential buyers, suggesting homes sold at auction are often highly sought-after.

For units, the median price at auction jumped $84,000 in the first three months of this year to $1.03 million.

This means buyers would have to have saved an extra $16,800 in the past three months, or an extra $1400 per week, just to maintain a solid deposit.

Buyers should brace themselves if they want to break into the market, as it is showing no signs of slowing down.

Strong price growth and high clearance rates are expected to continue for months, according to Northern Beaches auctioneer Jake Downs of Auction Works.

“People have money and are desperate to get a home; they’ll just chuck everything at it,” he said.

With an average of five bidders per auction, many were walking away empty-handed, Mr Downs said, meaning strong demand wasn’t going anywhere anytime soon.

“I think we’re going to get this carrying on until we run out of buyers … [that will only happen] if they start restricting lending again … or the buyer pool goes, ‘This is crazy, we’re going.'”

It was a similar story in Melbourne where the median auction price for houses jumped $35,000 in March alone and grew by almost $100,000 since December.

A Melburnian who was in the market to buy a house at the start of the year would have needed to save an extra $19,850 in the past three months to maintain a substantial deposit. That works out to an extra $1654 per week.

Even for relatively affordable units, the median auction price rose by $57,000 to $724,000 in the past three months in Melbourne.

This would leave hopeful homeowners looking for a Melbourne unit short $11,400 in the past three months, or needing extra savings of $950 per week.

The city’s market is rising but price gains have not been quite as strong as in Sydney and the boom could be shorter-lived too as some auctioneers believe the frantic pace cannot be sustained for the rest of 2021.

By spring, many believe the market may slow to a more even pace, when more properties hit the market.

“We’re running a marathon at a 100-metre pace and that is unsustainable,” Brad Teal Woodards auctioneer Brad Teal said. “There’s a time in a marathon where you have to stop and have a drink.”

Mr Teal said he had already noticed a drop in the number of prospective buyers inspecting houses and units for sale. Over the past six weeks they had dropped from around 25 a week, to just five.