How ETFs can help you save for a house deposit

Saving for a home deposit can feel overwhelming, especially with high property prices and the pressure of meeting savings targets. But what if there was a way to grow your savings faster?

Enter ETFs as powerful investment solutions that are changing the way Australians save for major milestones like home ownership. In this article, we’ll explore how ETFs can help you boost your deposit fund, offering a simple yet effective strategy for growing your wealth over time.

Why saving for a property deposit can be challenging

Saving in today’s environment means overcoming several hurdles.

Australian property prices have consistently climbed, often far outpacing income growth. For instance, CoreLogic data reveals that across the combined capital cities, median dwelling values increased by 3.8% over the 12 months to 31 January 2025¹ to $897,632 – a daunting figure for first-home buyers, especially those aspiring for a 20% deposit.

Inflation complicates matters by eroding the value of savings, and the limitations of savings accounts can compound this. While offering safety and guaranteed returns, savings accounts can fail to outpace inflation, especially once promotional rates and conditions are factored in.

For example, the highest savings account rate currently available is 4.9% p.a.², but this applies only to balances between $50,000 and $100,000, with significantly lower rates for other balances or beyond promotional periods³.

For aspiring homeowners, these factors combined mean that traditional savings strategies alone may not be enough to close the gap between your savings and your deposit goal.

The case for a diversified ETF portfolio

Saving for a property deposit can be a long journey if you were to only use a term deposit. That is where a diversified ETF portfolio may come in handy.

The role of diversification

Diversification is another key consideration when building a portfolio for a property deposit. By spreading your investments across a range of asset classes, sectors and geographies, you can reduce the impact of poor performance from any one area. This approach can help smooth out the ride, even in portfolios that include a higher proportion of growth assets.

For example, a diversified ETF portfolio might include exposure to:

• Australian shares to capture local market growth
• Global shares to access opportunities across developed and emerging economies
• Bonds and fixed income for stability and consistent returns
• Cash to provide liquidity and safety for near-term needs

ETFs make diversification straightforward by offering exposure to hundreds, or even thousands, of underlying assets within a single investment. This inherent diversification can help reduce risk without requiring significant effort or expertise from the investor.

Why time horizon matters

The time until you expect to access your funds plays a critical role in shaping your investment strategy. For savers with a longer timeframe – say five years or more – it may be appropriate to include a higher allocation to growth assets, such as shares.

Growth assets tend to deliver higher returns over time, though they can also experience greater short-term volatility. The longer your investment horizon, the more time you have to ride out market fluctuations and benefit from potential compounding returns.

As the time to access your funds draws closer, it often makes sense to shift toward a more conservative allocation.

This process, sometimes referred to as a ‘glide path’, involves gradually reducing exposure to growth assets like shares and increasing the allocation to lower-risk investments like bonds or cash. The idea is to preserve the savings you’ve worked hard to accumulate, protecting against the risk of market downturns as your deposit goal approaches.

9 ETFs to consider

When building a diversified ETF portfolio for a property deposit, it’s important to align your choices with your time horizon and risk tolerance. Different types of ETFs may suit different stages of the savings journey, offering flexibility as your timeline evolves.

Early stage: focus on growth

For savers with five or more years to reach their goal, growth-focused ETFs may be appropriate. These ETFs aim to deliver higher returns over the long term but can experience greater short-term volatility.

• Australian equities: Provide exposure to the largest companies on the ASX. For example, A200 Australia 200 ETF offers access to the top 200 Australian shares in a single trade.
• International equities: Broaden diversification by including international markets. A fund like BGBL Global Shares ETF offers exposure to global developed economies.
• Geared exposures: For those comfortable with gearing, Betashares offers a range of modestly leveraged solutions through the Wealth Builder series. These include GHHF Betashares Wealth Builder Diversified All Growth Geared (30-40% LVR) Complex ETF , G200 Betashares Wealth Builder Australia 200 Geared (30-40% LVR) Complex ETF , and GNDQ Wealth Builder Nasdaq 100 Geared (30-40% LVR) Complex ETF , which invest in diversified growth portfolios, Australian shares and US technology, respectively. While leverage can help you reach your financial goals faster, it also can lead to sharper downturns during market corrections. If mitigating risk is a key factor for your decision making, then you should carefully consider whether this product is right for you.

Midway: balancing growth and stability

As your timeline shortens (around two to four years out), shifting to a balanced portfolio can help reduce volatility. Balanced ETFs or fixed income options combine growth potential with more consistent returns.

• Balanced ETFs: Diversified funds like DBBF Ethical Diversified Balanced ETF mix shares and bonds, providing a moderate growth profile with reduced risk.
• Bonds: Funds like OZBD Australian Composite Bond ETF  focus on Australian government and corporate bonds, offering steadier returns compared to equities.

Final stage: prioritise preservation

In the final stage (one year or less), preserving your savings becomes the priority. Allocating more to defensive assets like cash-equivalent ETFs can help safeguard your deposit against market swings.

• Cash and money market securities: These funds, like AAA Australian High Interest Cash ETF and MMKT Australian Cash Plus Active ETF aim to provide stability and liquidity for short-term needs.

Bringing it all together: using ETFs to build your property deposit

Saving for a property deposit is no small task but, with the right approach, it’s possible to make the journey more aligned with your financial goals.

While traditional savings accounts offer stability and certainty, they may not always keep pace with inflation, especially over longer time horizons. Diversified ETF portfolios provide a way to balance growth potential with varying levels of risk, depending on your needs and timeline.

Sources:

1. CoreLogic, https://www.corelogic.com.au/news-research/news/2025/national-home-values-hold-steady-as-regional-australia-pushes-to-new-record-highs, as of 31 January 2025. ↑

2. https://www.savings.com.au/savings-accounts/, as of 19 February 2025. ↑

3. The Mutual Bank. As at 28 November 2024. ↑