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Higher interest rates could give first home buyers a chance to get on the property ladder as homeowners are forced to sellsays a real estate agent.
Mathew Tiller, head of research at LJ Hooker, said a sharp rise in monthly mortgage repayments since the Reserve Bank’s rate hikes began in May 2022 could lead to more investors selling their rental properties.
“Investors looking to sell will be good news for first-time buyers who generally tend to buy in the same market,” he said.
A very low rental vacancy rate coincided with record immigration, with 454,400 foreigners settling in Australia in the year to March.
While rents in the capital have soared by 16 per cent over the past year, monthly mortgage repayments have increased by an even more dramatic 63 per cent following the RBA’s 12 interest rate rises. in just over a year.
Higher interest rates could give first-time buyers a chance to climb the property ladder as homeowners are forced to sell, according to a real estate agent.
Mathew Tiller, head of research at LJ Hooker, said a sharp rise in monthly mortgage repayments since the Reserve Bank’s rate hikes began in May 2022 could lead to more investors selling their rental properties.
This has led to a growing gap between rental income and mortgage repayments.
This saw landlords sell their homes with a 50 per cent capital gains tax reduction rather than claiming rental losses as negative tax relief.
“Even though rents have increased, it appears some investors are looking to sell as the gap between income and expenses widens,” Mr. Tiller said.
Nationally, the number of distressed homes sold increased 1.3 percent to 5,246 in September, according to data from SQM Research.
Mr Tiller expects more homes to come on the market in late October, after the Reserve Bank this month kept interest rates at their highest level in 11 years at 4.1 percent.
“Auction volumes were lower last weekend due to long weekends in most states and territories, but volumes will rebound through the remainder of October,” he said. declared.
Ratings agency Moody’s Investors Service expects more home borrowers to fall into delinquency, falling 30 days or more behind on their mortgage payments.
“Australian residential mortgage delinquency rates, which increased in the June quarter, will continue to rise for the remainder of the year as high interest rates and inflation erode household savings “, said analysts Alena Chen and Philip Au.
In the June quarter, the home loan default rate increased to 1.38 per cent from 1.25 per cent in the March quarter as the Reserve Bank increased interest rates twice.
“While the Reserve Bank of Australia has suspended its interest rate hike cycle, the central bank’s sharp rate hikes between May 2022 and June 2023 have significantly increased mortgage repayment costs,” Moody’s said .
Martin Bregozzo, managing director of Civil Property Valuers, said first home buyers are hoping to take advantage of the increased supply in the market as struggling borrowers are forced to sell.
“I guess they would be like, ‘We spend a lot of money on rent, it would be great to have a house or an apartment,’” he told Daily Mail Australia.
But he added that even if more investors sold their homes, housing affordability was unlikely to improve for first-time home buyers.
“There’s a shortage of options available to purchase, so even if you were ready to go, there’s not much,” Mr. Bregozzo said.
“Some first-time homebuyers or people moving up to the next level, that would allow that kind of movement to happen.”
While rents in the capital have soared by 16 per cent over the past year, monthly mortgage repayments have increased by an even more spectacular 63 per cent following the RBA’s 12 interest rate rises. in just over a year (pictured is an LJ Hooker connection). Sydney)
“Some are becoming owners, others who were paying a mortgage have gone back to renting. There’s going to be this shake-up, but it’s not going to do anything to make housing more affordable.”
The national average new mortgage for owner-occupiers in August was $584,907, according to data from the Australian Bureau of Statistics.
But in New South Wales the figure was $722,132.
The ABS did not release data on first home buyers in August, but in May new property entrants accounted for 11.6 per cent of the overall value of new owner-occupier loans.
This meant that the vast majority of property buyers, who already owned one, had a vested interest in prices rising.
“As soon as they become owners, they just want values to continue to increase,” Mr. Bregozzo said.