It’s not exactly breaking news that Australia’s property market is in a tough spot, but recently released data suggests Sydney’s situation may be worse than many others and many people realise. Could: Not only is it nearly impossible to buy a home, but the few lucky enough to own properties are having to sell them for unprecedented losses…
With a celebrity mass exodus underway and a livability crisis that has never seemed better, it may not surprise you to hear that for many people in Australia’s biggest city it is harder than ever to buy property. However, recent releases show that not only is it getting harder to buy a home, but selling it couldn’t be much more fun…
Rising interest rates have increased mortgage costs, making it more difficult for first time buyers to get into the market. A study by the Australian Housing and Urban Research Institute showed that 40% of 25-34 year olds in Sydney and Perth expect to receive financial support from their families to buy a property.
University of Sydney Senior Lecturer in Urbanism, Dr Lawrence Troy, commented that it was impossible to buy property in Sydney without significant financial support: “If you’re living in Sydney and trying to buy in Sydney, you can make it a support a family in a pretty significant way,” Troy said. “Saving and living frugally won’t work to get you over the line — unless you’re on a sizable salary.”
The Domain First Home Buyer Report shows a young couple with an average income would need to put 50.9% of their earnings towards initial mortgage repayments if they bought an entry-level home in Sydney, up from 31.5% in 2021.
Unit buyers will see 34.2% of their income go towards repayment on the $571,500 entry-level apartment, up from 25.5% in 2021. These eye-watering numbers demonstrate the significant – almost impossible – financial burden expected of first-time buyers in Sydney.
In addition, the nationwide reduction in borrowing capacity is also a significant issue for residents who have already saved a deposit. Mortgage broker Rob Lees of Mortgage Choice Blaxland and Penrith commented that some borrowers are now being assessed on their ability to handle mortgage rates closer to 9% due to the 3% serviceability buffer:
“It’s actually quite high and it’s a big issue, given […] First home buyers just getting started [in their careers] And their salaries aren’t that big,” Lees said. “In some cases, parents put down money to lower the loan amount so that it actually meets serviceability requirements.”
Western Sydney has the shortest savings time in the city, but it’s still not early… Image: Carly Earl
The situation for first home buyers is going to remain challenging unless there is a sharp fall in property prices or a sudden reduction in interest rates. Which seems impossible.
Western Sydney residents are taking the shortest time to save a 20% deposit, but the Mount Druitt region still requires an average of five years and six months for a first home or two years and ten months for an entry-level purchase Is. Unit in the Penrith area.
To only make matters worse, CoreLogic’s latest Pain & Gain report suggested that more than one in twelve properties sold in Sydney in the last quarter did so at a loss amid the declining market.
As 8.8% of property sales traded for modest losses in the December quarter – the third highest rate in a capital city after Darwin and Perth – the report also showed that losses were heavily skewed towards the apartment market , where 14.8% resale took place. Marginal damage compared to 2.1% of homes.
Part of the risk appetite and steady price increases are contributing to the loss-making sales, especially in areas associated with high growth and high levels of supply. Botany Bay and surrounding suburbs such as Mascot and Pagewood had the highest rate of loss-making sales at 26.7%, followed by the areas of Parramatta, Ryde and Strathfield.
Dr Shane Oliver, chief economist at AMP Capital, said more homes would be sold at a loss amid the market downturn, but he was surprised by the proportion of loss-making sales given the rapid rise in prices in recent years.
Typically, homeowners only sell at a loss if they need to reduce their debt or want to buy elsewhere. However, those looking to upsize rarely resell soon, so they were less likely to lose their money.
Parramatta, one of Sydney’s loss-making hotspots. Image: Ben Rushton
“To sell at a loss you feel you have to buy near the peak, which is a quick turnaround. [to be selling again], It’s almost indicative that maybe some people are suffering from hostage stress,” he said.
Despite the recent rise in Sydney prices, HSBC chief economist Paul Bloxham expects more pain for Sydney sellers, predicting a peak-to-peak decline of 15% to 20%.
Bloxham said the closed borders had also affected housing prices with investors becoming more exposed and owning more apartments. He also added that sellers still have to be realistic in the short term:
“We’re not at the point where it’s going to stabilize, but it’s coming,” Bloxham said. “I don’t think we’ll see a really strong return to home prices.”
We’re sorry to start your weekend with some less-than-enthusiastic news about Sydney’s sluggish property market, but you better be in the loop: fire away if you want to sell, and If you’re looking to buy, it might be time to take a trip to Mom and Dad’s bank – we recommend arriving with a beer and bouquet in hand…
Source: www.dmarge.com
