Sellers fear property market 'stops' as declines intensify

“The boom is over and property prices are dropping, at an accelerating pace,” said Shane Oliver, chief economist at AMP Capital.

Buying agent Cate Bakos added: “This remains a highly segmented market with regional market and capital market prices falling and rising out of sync. Buyers are becoming more particular, which means well-renovated properties with amenities are still in high demand.”

Shortage of building materials, rising renovation costs and difficulty finding experienced and qualified experts are making buyers increasingly reluctant to buy properties that require additional work, Bakos said.

In Sydney, buyer’s agent Patrick Bright said there was an increasing “argy-bargy” in the market because of the possibility that prices would fall in the coming months resulting in buyers unwilling to pay the asking price.

“That’s the mental gymnastics caused by growing negative sentiment,” says Bright.

Prestigious properties with unique attractions, such as harbor views or proximity to quality schools, continue to attract buyers, particularly from China, Singapore and Hong Kong, the agency said.

Buying agent David Morrell said: “The Triple A area is growing stronger and is still seen as a safe haven.”

Morrell said he would “put his head in the noose” predicting a rate hike and weakening sentiment “won’t affect Melbourne’s top end in the slightest”.

Martin Schiller, a sales agent for Savills specializing in Sydney properties ranging in value from $10 million to $30 million, agrees that the prestigious and high-quality end market remains strong.

“There has been some price erosion where price is the only difference in the property compared to competing properties on the market,” Schiller said.

According to CoreLogic, which monitors the property market, Sydney’s clearance rate has fallen below 50 percent, which is the worst result since the outbreak of the COVID-19 pandemic in early 2020 that imposed restrictions on home inspections and auctions.

Sales and prices down

Auction numbers fell by more than 20 per cent across the nation’s capital cities combined, including a 40 per cent drop in Melbourne.

There was increasing market tension, with the Reserve Bank of Australia raising interest rates to 1.35 per cent, a 0.5 percentage point increase and the third straight rate hike in three months – the fastest back-to-back rate hike in nearly 30 years. .

Oliver at AMP Capital expects the cash rate to peak around 2.5 percent in the first half of next year with a cut in the second half of next year. He estimates prices will fall by around 15 to 20 percent.

Martin North, principal of Digital Finance Analytics, an independent financial services consultancy, who also expects prices to fall by around 20 percent, warned buyer confidence is declining and capacity to pay is weakening rapidly due to rising interest rates.

“If you really need to sell, then you have to sell,” North said of rising cost of living that forced some sales. “Lenders are quietly encouraging troubled property owners to put their place in the market.”

The number of troubled housing listings jumped more than 10 percent across NSW in June compared with the previous month, as owners struggled with falling demand and rising costs, according to SQM Research, which monitors the property market.

The Gold Coast had the worst-hit homes list, with 315 homes, followed by Western Australia’s central coast area with 201, and Queensland’s Sunshine Coast with 185, according to SQM.

Depressed residential property listings occur when the property must be sold quickly, often at a lower price and possible financial loss to the owner.

Recent examples of big discount sales include the three bedroom, freestanding Victorian cottage in Port Pirie, South Australia, which was discounted from $119,000 to $99,000 after being on the market for more than 420 days.

In Seven Hills, about 36 kilometers northwest of Sydney, a six-bedroom, two-bath weatherboard house has been reduced in price by $20,000 to $930,000 after being on the market for 55 days.

A house in Tartura, about 180 kilometers north of Melbourne, was reduced in price from $870,000 to $660,000 after being on the market for 58 days.

In a bid to sell prestigious apartments, developers are offering higher commissions to agents and to buyers of lucrative interior design and furniture packages for penthouses and sub-penthouses with a $3 billion development at Melbourne’s Southbank.

Best rate

Borrowers, who more than a year ago scrambled to get into fixed-rate mortgages, are switching record numbers to variable-rate, usually when their fixed term expires.

Key rates for the top one, three, and five-year fixed rates that fell below 2 percent last year for $1 million borrowers with a 20 percent deposit seeking 30-year loans have more than doubled.

But there are still some sharp levels for sharp borrowers.

For example, the cheapest one-year fixed rate comparison rates (which is the real cost of borrowing after including additional borrowing costs) range from Tic:Toc Home Loans 2.82 percent to Beyond Bank 4.69 percent.

“Borrowers are still very interested in locking in fixed rates low,” said Laura Osti, spokeswoman for Tic:Toc.

The cheap three-year rates include a BCU comparison rate of 4.75 percent and Goldfields Money’s 4.48 percent.

The cheapest standard variable comparison rates offered from the top four range from 3.29 percent to 3.48 percent.

The Australian Finance Group, the country’s largest mortgage aggregator, said the number of borrowers applying for fixed-rate mortgages had fallen from a record high of 40 percent this time last year to less than 10 percent.

Total refinancing values ​​rose more than 3 percent during May, with owner-occupier refinancing hitting a record high, according to an Australian Bureau of Statistics analysis.

Cashback and discount

Borrowers can negotiate sharper rates and large cashbacks. For example, Citi offers $4000 where a home loan is $750,000 or more for new purchases and refinancing applications. The amount rises to $6000 where the loan is $1 million or more.

The main issues a borrower should consider with a new loan include:

• What rates are offered and is there a cash incentive to cover switching costs?
• Can additional payments be made before the next rate increase?
• Is the loan portable so that it can be transferred to another lender?
• Does it include money-saving features, such as account offsets, or does it allow additional payments?
• What are the fees and costs? Brokers claim some borrowers are violating flat rates, which can result in high debit fees. Other costs to consider include application, settlement and state government fees, such as mortgage registration, which can cost $500.

Mortgage brokers, such as Christopher Foster-Ramsay, principal of Foster Ramsay Finance, claim that lenders are more likely to negotiate cheaper variable rates for borrowers on plans that also include other features such as fee waivers on credit cards, discount insurance, and accounts. offsets.

Offset accounts allow mortgage interest to be reduced by entering a recurring payment, or lump sum, such as a bonus, into a savings or checking account.

Some banks allow borrowers to open multiple offset accounts – one for bills and commitment fees, and another for day-to-day expenses.

The broker claims the lender will negotiate a discount of around 200 basis points from the standard variable rate to attract new borrowers and 120-150 basis points to retain existing borrowers.

The attached table compares plans from the top four, including fees and surcharges, plus the bank’s lowest variable rates. Annual fees range from $120 to $395.

“Savings from an offset account generally have to cover costs,” Foster-Ramsay says.

More difficult to borrow

The buffer that prudential regulators can use at 3 percent also affects lending capacity. This means a borrower with a 4 percent mortgage will have the capacity to repay rated by the lender at 7 percent.

“Property buyers have been negatively impacted because the rate hikes have not kept pace with the falling prices,” said Oliver at AMP. “This means their borrowing power has been lowered, but house prices remain high,” he said.

The agent claims it is a growing problem for buyers who need to borrow up to their maximum loan limit.

“Usually upgrades and investors have some equity under their belts,” said Bakos’ buying agent. “Those who need to borrow within their capacity are under pressure because rising interest rates can reduce their budget,” he said.

Investors continued to be attracted by the rise in rental yields as vacancy rates tightened across the country, the agency said.

Sydney’s combined rents were up 17.5 per cent over the past year, Brisbane 19 per cent and Melbourne about 15 per cent, according to SQM Research. Investors’ share of new mortgages surged earlier in the year as many sought alternatives to volatile stock market investments, the agency said.

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