PHOTO: Numerous real estate agents in Sydney and Melbourne say the trend is becoming more entrenched as mortgage stress escalates. FILE
People who cannot afford to pay their mortgages or sell without taking a loss are increasingly putting their properties onto the heated rental market instead.
Key points:
- House prices nationally have dropped nearly 9 per cent on average from their most recent peak
- Real estate agents are starting to see forced sellers who can no longer afford their mortgages
- Some people in negative equity are renting out their homes instead of taking a loss on a sale
Jazmin Pfluger took ABC News on a tour of a small one bedroom apartment in Melbourne’s inner-west that had been listed for sale for between $310,000 and $325,000.
The real estate agent said there had not been “enough interest at that price point”.
“That’s compared to 12 months ago when the market was doing really well for sales,” she said.
“It’s definitely changed a bit since then. The prices have dropped.
“So, a lot of owners are looking to rent, which is a good option at the moment with the [rental] price going up. It’s extremely busy.”
Leandro Quirino was one of the many people who inspected the apartment in Footscray that is now listed at $370 per week.
He is considering applying for it – despite the constant noise of trains running along nearby tracks.
“I don’t think that you are finding something better for the same price,” he said.
“Everything is more expensive. I think more people are just coming to the country and the price has gone up.
“The prices are just crazy.”
And the story of this humble apartment in Melbourne is illustrative of the bigger picture.
Property prices continue to slide
Property prices boomed during the pandemic as interest rates plunged to record lows.
Values shot up by more than 25 per cent nationally and many people bought at or near the top of the market.
Now interest rates are rising at the fastest pace on record, with eight rate hikes already delivered by the Reserve Bank and more expected to take the cash rate up towards 3.5 per cent, and potentially beyond.
Variable mortgage rates are typically a couple of percentage points above the cash rate, leaving most borrowers looking at 5-6 per cent.
That is hitting the borrowing capacity of potential buyers, like Nilesh Shukla.
“Before the rate increases started I was getting [pre-approved for] something around $900,000,” he told ABC News.
“But now when I approached the bank they say, ‘We can lend you around $600,000 to $650,000.
“It’s quite a substantial decrease.”
In turn, the reduced capacity to pay is bringing down the price of homes further still.
READ MORE VIA ABC
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