Mortgage Strains Amidst Rising Australian Real Estate Prices

As the property market in Australia remains a hot topic, two recent reports offer contrasting insights into the current landscape of real estate and mortgages.

According to a recent article by Nathan Mawby, Melbourne’s Central Business District (CBD) stands as the most affected by mortgage delinquencies, with a rate of 4.87% recorded in May. This is supported by data from Moody’s which revealed that 181 out of every 10,000 mortgage holders in Melbourne were behind on their repayments. This trend is not isolated to Melbourne’s CBD. Other areas such as Bellbrae in Geelong, Albanvale in Melbourne’s west, and Eltham in the city’s northeast also show increasing delinquency rates. Geoff White, branch manager at Barry Plant Yarra’s Edge, noted the mounting pressures on homeowners and investors, saying, “The full effect of interest rate rises is really starting to hit now”.

On the flip side, a KPMG property report shared by Omar Fardi paints a more optimistic picture for property prices. It forecasts national house prices to rise by 4.9% over the next nine months, followed by a surge of 9.4% in the year leading up to June 2025. Apartment prices are also expected to rise, albeit at a slower pace. However, these figures vary by region. For instance, while Perth house prices are expected to see the highest rise in the remainder of FY24, Hobart is predicted to outperform other cities in FY25 with a whopping 14.2% surge.

Dr. Brendan Rynne, KPMG Chief Economist, provided insights into the driving factors behind these price movements. He stated, “Despite high interest rates, constrained supply will likely dominate the factors influencing property prices in the short term and result in continued price gains in most markets during FY24″. Dr. Rynne also touched upon the challenges first-time buyers face, highlighting that they now need to allocate approximately half of their earnings on mortgage payments, a substantial increase from a third just three years ago.

In conclusion, while rising property prices might seem like good news for some, the increasing mortgage delinquency rates can’t be ignored. The juxtaposition of these two reports highlights the nuanced challenges and opportunities present in Australia’s dynamic property market.

References:

Melbourne CBD home to nation’s worst mortgage delinquency rate. Nathan Mawby. ↩ https://www.realestate.com.au/news/melbourne-cbd-home-to-nations-worst-mortgage-delinquency-rate/ 

KPMG Property Report Reveals Real Estate Prices in Australia to Rise by 4.9% in Next 9 Months. Omar Fardi. ↩ https://www.crowdfundinsider.com/2023/09/213420-kpmg-property-report-reveals-real-estate-prices-in-australia-to-rise-by-4-9-in-next-9-months/