Potential home buyers have become more canny with their money because of the economic downturn, searching for cheaper and smaller homes further from city centres, a new survey has found.

Research by Bankwest-Mortgage and Finance Association of Australia (MFAA) found that nearly half (47.9 per cent) of first time buyers are now looking to purchase a cheaper property than they originally intended to break into the housing market.

“The financial crisis has changed the aspirations of home buyers, effectively downsizing the great Australian dream,” MFAA CEO Phil Naylor said, releasing the findings on Wednesday.

About a third (32.3 per cent) of the 850 people surveyed said they were looking for a smaller property, while 24 per cent were seeking out an older property rather than moving to a new home, and 31.3 per cent said they were looking for properties further from city centres.

“While Australia has the largest new home sizes, it seems first time buyers are turning their back on the McMansion dream,” Mr Naylor said.

”(They) are looking at buying a home instead of a super-sized property that makes a statement about their lifestyle or prestige.”

The survey also found 43.8 per cent of first time buyers are toning down their lifestyle and putting money aside in case the economy deteriorates.

“In contrast to claims that first time buyers are likely to default on their loans as interest rates increase, these figures suggest… people are more strategic than they are given credit for,” Bankwest head of mortgages Dean Gillespie said.

Just over two thirds (67.2 per cent) of renters say renting is too expensive and 40.3 per cent they feel stuck in a rental rut.

Only one in five renters said they were happy to keep renting so they could maintain their current lifestyle and avoid sacrificing home size, location and proximity.

“Some renters seem perfectly happy to continue renting, but they are clearly still in the minority,” Mr Gillespie said.