, more double-digit price falls and onerous serviceability tests for first home buyers threaten prospects of a turnaround.
An estimated 800,000 downsizers, particularly in Sydney and Brisbane, are considering cashing in on big capital gains made over recent years in a bid to boost retirement income or lower debt, according to exclusive analysis from Digital Finance Analytics. The buying power of a first home buyer on average full-time earnings with a 20 per cent deposit is now 27 per cent lower than it was a year ago, which points to increased pressure on prices even if rates have peaked, according to AMP analysis.Monique Jeremiah, 36, owner of a modelling agency, says the sharp downturn in prices and rising rents creates the option of leasing her house and buying an apartment.
Bakos says there are increased opportunities to snag a deal at auction because of less competition and more willing sellers. He adds: “Right now the flow through of rate hikes, the high risk of more to come, the reduction in buying power along with uncertainty about the economic outlook generally are likely to keep most buyers sidelined.”
“A peak in rates is unlikely to be enough. We do not see rate cuts until late this year or early 2024,” adds Oliver. He is confident capital gains from his Port Melbourne apartment that he bought in 2009 will cushion any recent price falls.Sellers of trophy properties are confident rising interest rates won’t discourage wealthy buyers.
Their 1905 home, which has been extensively renovated and features a modern extension, is located in prestigious Hamilton Hill where coveted properties typically sell for $10 million-plus. A person buying their first home in December this year is likely to pay an interest rate of 6.43 per cent and be stress-tested at 9.43 per cent.
CBA, the nation’s largest lender, estimates around $95 billion of its fixed rate mortgages will expire this year while for Westpac, the second-largest lender, it is expected to be about $86 billion, according to their annual reports.“This will likely lead to a huge increase in mortgage stress and a rise in distressed selling,” says AMP’s Oliver, who also warns it could accelerate the fall in property prices.
Sell then buy in 2 years time. Cant lose