Keeping abreast of the current market and its fundamentals is something essential for me to do my job well.
I love it when something comes across my desk that I know will be of interest to ALL of my clients…in all sectors and price points! Like this interesting read… posted by Jim Malo courtesy of Domain.com on why homeowners with a mortgage haven’t YET fallen off the mortgage cliff.
In summary, it read — recent analysis highlights the worsening crisis in housing affordability in Australia.
Economists had feared that borrowers shifting from low fixed-rate mortgages of around 2% to higher rates near 6% would face significant financial strain, potentially leading to forced property sales. According to the Real Estate Institute of Australia, housing affordability has declined by 15% over the past five years, with a smaller 13.4% decline over the last decade.
Dr. Diaswati Mardiasmo, PRD’s chief economist, emphasized the alarming acceleration of unaffordability, stating, “It’s definitely accelerating in terms of unaffordability.” She pointed out that the COVID-19 pandemic has been a major driver, saying, “In the past five years that’s COVID. It’s a supernova event that pushed unaffordability.”
Jim Malo also noted that without the Reserve Bank of Australia’s interest rate hikes, house prices could have risen even further, potentially reaching a median price of $1.4 million. Economists agree that the low interest rates during the COVID boom allowed buyers to take on more debt, inflating property prices, and that the lack of housing supply, exacerbated by high interest rates, continues to worsen the situation. “We need more supply,” said REIA president Leanne Pilkington, underscoring the importance of addressing the fundamental issues in the market.
Interesting times!!