Affordable markets in 5 per cent deposit scheme price cap now suffering biggest house price falls
One group of Aussie homebuyers is now more likely to be caught in negative equity, where they owe their bank more than their home is worth.
Affordable markets are now suffering the biggest drop in house prices amid fears more recent first homebuyers will be trapped owing their bank more than their home is worth if they lost their job and were forced to sell.
New data from real estate group Ray White shows suburbs with median house prices within the Federal Government’s 5 per cent deposit scheme cap had some of the biggest falls in September.
The Ipswich and Logan areas on either side of Brisbane, Mandurah in Perth’s outer south and areas of western Sydney and the Central Coast are among the worst-affected areas, as some of Australia’s richest postcodes surprisingly saw price rises.
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“People build wealth in their home, they rely on a home increasing in value to the upgrade and if we do see very limited price growth in these affordable markets, it will become very hard for them to upgrade without taking quite a bigger chunk of debt,” she told The Nightly.
“Definitely, over the next six months with affordable markets falling the quickest, it is likely to get worse because of the outsized influence of the Budget on the affordable market.”
Labor’s Budget stopped investor landlords from being able to negatively gear established homes, exchanged after May 12, from July 1, next year, which is affecting those affordable markets with more first homebuyers.
“We do consider that the more affordable end of the market will remain weaker for longer because of very low levels of investor activity so they may be in negative equity for quite some time,” Ms Conisbee said.
The Reserve Bank’s four rate rises in February, March, May and September - taking the cash rate to a 15-year high of 4.6 per cent - are also taking momentum out of the lower end of the housing market.
Another rate rise, which would take the cash rate to an 18-year high of 4.85 per cent, could potentially cause heartache for recent borrowers should it cause unemployment to climb from September’s five-year high level of 4.7 per cent to a level closer to 5 per cent.
“If you lose your job, that’s a particularly bad situation because not only do you have a rising debt bill, you’ve also got no income and that could lead to a particularly challenging situation,” she said.
Brisbane’s outer suburbs, within the $1 million price cap, are doing particularly bad with Ipswich region prices slipping by 1.4 per cent last month to $850,000.
The Logan-Beaudesert region had a 1.4 per cent slide, to $910,000, as the Moreton Bay region in city’s north had a 1.3 per cent drop to $960,000, data from Ray White’s analytics firm Neoval showed.
In Perth, where the price cap is $850,000, Mandurah prices fell by 1.3 per cent to $810,000.
Parts of greater Sydney, well below the $1.5m price cap, also suffered price falls in September.
Central Coast house prices fell by 0.5 per cent to $970,000, while Blacktown in the western suburbs suffered a 0.4 per cent drop to $1.15m.
Nearby Parramatta had a 0.3 per cent drop to $1.43m.
But despite the RBA’s aggressive rate hikes and no scope for first homebuyers to get in with a 5 per cent deposit, Sydney’s eastern suburbs had a 0.2 per cent gain to a very expensive $3.6m.
Bargain hunters are stepping in, following an 8.5 per cent annual fall in Australia’s most expensive property market.
“You’re buying into markets that don’t normally fall that much - these are highly desirable markets and as a result are seeing much better conditions,” Ms Conisbee said.
The affordable markets with monthly falls also had strong annual gains with Mandurah prices rising by 6.4 per cent, ahead of Ipswich on 4.4 per cent, Logan-Beaudesert on 3.8 per cent and Moreton Bay north on 3.1 per cent.
But in Sydney during the past year, Parramatta has plunged by 6.8 per cent, with Blacktown slipping by 4.8 per cent and the Central Coast falling by 2 per cent.
