Warmer weather won’t guarantee hotter prices this spring selling season, with high interest rates and economic uncertainty putting a damper on borrowing power and seller expectations, according to Compare the Market Property Expert, Andrew Winter.
But the new season could bring new hope for aspiring buyers who have their deposit saved, with the ice starting to melt on new listings.
“Conditions have been tough for home buyers this year with short supply and high demand creating an overheated, overcrowded marker,” Mr Winter said.
“But we’ve started to see the steam coming off asking prices in some of the capitals including Sydney and Melbourne as sellers adjust their expectations in line with buyers’ reduced borrowing capacity.”
Asking prices in the capitals dropped 0.5% in July, according to SQM Research data, with the biggest drops occurring in Sydney where prices on house listings reduced by 1.3%.
“In the months ahead we should also see the ice melt on new listings, with sellers bursting out of their winter hibernation ready to move.
“This could mean there are more opportunities for new buyers, who may have been stifled a bit by rising prices and reduced borrowing power over the past two years.”
Figures from Compare the Market show some people’s borrowing power has plummeted by up to $292,000 since the record run of rate rises began back in May 2022.
Borrowing capacity | May 2022 Assumed variable rate of 2.86% | Assumed variable rate of 6.25% | Assumed variable rate of 6.5% | Difference between May 2022 and 6.5% |
Single with no dependents on 75K | $511,100 | $366,900 | $359,000 | $152,100 |
Couple with no dependents on combined 150K | $980,900 | $704,100 | $688,900 | $292,000 |
Family with two dependents on combined 150K | $868,400 | $623,400 | $609,000 | $259,400 |
Table constructed using the Minimum Living Expenses table per income bracket and family structure. May 2022 calculation assumes a variable rate of 2.86%. The second column calculation assumes an average variable rate of 6.25%. The third column assumes there is one more 25 basis point increase, and that is passed on in full, for an assumed variable rate of 6.5%. | ||||
But higher interest rates have also been catching up with homeowners. According to SQM research there were 5,111 homes sold under distressed conditions in Australia in June – a 0.2% monthly change.
Mr Winter urged new buyers to stress test their mortgage, as higher interest rates could be here to stay longer than hoped.
“The cost of borrowing has gone through the roof and that impacts the market in all sorts of ways,” Mr Winter said.
“But if you’re asking yourself whether to keep renting and wait to see if the Reserve Bank cuts rates and property prices fall – that’s an impossible question to answer.
“If you’ve found a property you like and you’re in the position to be able to buy, try not to worry about what prices will do in the short term.
“What’s important is that you buy in your budget, and don’t try to stretch yourself too far to ensure you can afford your repayments comfortably.”
For more information, please contact:
Natasha Innes | 0416 705 514 | natasha.innes@
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