Rising Distress in the Property Market Amid Economic Uncertainty
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As interest rates continue to climb, more homeowners are feeling the pressure, resulting in an uptick in distressed property listings in Australia’s two largest states. According to SQM Research, distressed listings in NSW have surged by 16.3% compared to last year, with Victoria experiencing a similar trend at 15.6%. Elizabeth Redman of [Publication] sheds light on the challenges homeowners face as they grapple with the highest levels of financial stress in a decade.
“Many home owners have been under pressure,” noted Louis Christopher, managing director of SQM Research. “It’s probably the greatest amount of stress they’ve experienced in the past 10 years, given where interest rates are, the rise in the cost of living that’s occurred.”
The distress in the property market contrasts with states like Queensland, Western Australia, and South Australia, where the property markets have remained relatively stable, with a decline in distressed listings contributing to a national fall. Christopher adds, “We’re not overly concerned at this stage, as the numbers are well and truly below pre-COVID levels.”
Despite the rising distress, not all homeowners are at a breaking point. Many have managed to cut back on discretionary spending, secure pay rises, or find additional work to cope with increasing expenses. Gareth Aird, Commonwealth Bank’s head of Australian economics, highlighted the resilience of Australian households. “Households are trying to do everything they can not to have to sell a place, given the cost of re-entering the market now is very high,” he explained.
However, the uncertainty surrounding future economic conditions and interest rates is prompting more homeowners to consider selling. “They may well be listing because of increased uncertainty—uncertainty around what interest rates are likely to do, uncertainty around what the economy will do,” Christopher stated.
The increase in listings is not just about distressed sales but also reflects a market adjusting to new economic realities, offering more choices to buyers and potentially stabilizing the market after years of limited availability. However, experts like Sally Tindall, RateCity’s research director, warn that the financial pressures are far from over. “Borrowers have thrown every effort into keeping up their mortgage repayments,” Tindall noted. “Even though tax cuts and energy bill rebates are beginning to provide some relief, homeowners should prepare for what may be another year of high interest rates.”
As the property market navigates through these turbulent times, the resilience of homeowners will be crucial in determining the future landscape of Australian real estate.
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