Regional areas and high-end Sydney suburbs lead the bounce back in property prices
Affordable regional areas and high-end Sydney suburbs dominate the list of suburbs bouncing back the fastest, according to CoreLogic. They have found that of the top 25 performing suburbs this quarter, 20 are located in regional Australia, spread across SA, VIC, NSW, WA and QLD.
According to CoreLogic, Robe in South Australia was the strongest-performing location over the past three months, growing 8.3 per cent, along with Dinner Plain in Victoria (8 per cent), Trangie (7.4 per cent) and Werris Creek (7.1 per cent) in NSW and Kalbarri in WA (6.9 per cent).
CoreLogic said more affordable locations in regional areas have been seeing demand from buyers. The report said it has been common for regional Australia to dominate growth charts through the pandemic period, but as the cycle has matured, it seems to be more rural regional markets with particularly low price points that have seen the strongest rates of growth.
Dinner Plain in the Victorian Alps, 13km from Mount Hotham, is a striking exception among the top-performing regional suburbs, where values have trended higher following a slight dip through the second half of 2022, the report said.
Along with regional areas, there are also several high-end Sydney suburbs seeing capital growth across the affluent North Sydney and North Shore suburbs. Top performing locations included East Killara (6.8 per cent), Middle Cove (6.4 per cent) and Warrawee (6.4 per cent). “These suburbs are largely popular with owner-occupiers, having a higher-than-average owner-occupier rate of 76 per cent, compared to an average 63 per cent across Greater Sydney suburbs,” the report said.
The report also found that Sydney and Perth had the highest portion of suburbs that were seeing growth, while Hobart was continuing to struggle. According to the report, “The number of suburbs seeing growth tells us a bit about where these regions are in the cycle. For example, Hobart had just two suburbs that saw dwelling value increases in the quarter, as the city has moved through a steep peak-to-current decline of -12.9 per cent. Steep price falls in the city follow more than seven years of almost uninterrupted growth, so it is somewhat unsurprising to see such an extended, broad-based decline.”
The report said there was a relatively high volume of suburbs experiencing growth across Sydney and Perth, however, they have very different growth dynamics. “Sydney dwellings are showing signs of a rebound, following a peak-to-trough decline of around 14 per cent over the year to January.”
Additionally, the report said that “Sydney often leads inflections in the housing cycle across capital city markets and may be seeing a relatively high portion of markets in growth because it is moving through to the next cyclical phase. Strong recovery has been concentrated in the high end of the market, with the top five performing suburbs having median dwelling values of at least $1.5 million.”
The current upswing could reflect a hangover of the pandemic and the interest rate environment, where affordable, regional property remains desirable, the report said.
Australia’s at increasing risk of mortgage stress
Rising interest rates and the surging cost of living are putting more Australians under mortgage stress, according to a new report.
PEXA’s Emerging Mortgage Risk report has found that families in certain locations around Australia are allocating 40-60% of their income to meet their home loan repayments – putting them at a high level of mortgage stress.
The report found there were 181 postcodes in New South Wales where homeowners are likely to be at high risk of missing a mortgage repayment by May – with the highest risk suburbs including Northbridge (71.8%), Dural (71.4%) and Avalon Beach (69.4%).
This was a significant increase compared to the prior quarter, where only 119 postcodes were deemed at high mortgage risk. This is an increase of 52.1%. The pain being experienced by mortgage holders across NSW was highlighted even further by borrowers needing to pay an extra $15,985 per year on average to meet loan repayments, up 62.3% from December 2020.
In Victoria, 22.3% of all postcodes in the state were at high risk of missing a repayment, up from just two suburbs in December 2020. An additional $13,327 (up 67.3%) was required by borrowers to meet their home loan requirements compared to December 2020. High-risk locations in Victoria include Balwyn (74.2%), Balwyn North (71.4%) and Canterbury (70.2%).
However, Queensland showed a lower risk profile than the other east coast states, with only 19 postcodes expected to move into high mortgage risk by May this year. The most at-risk suburbs in Queensland were Noosaville (58.3%), Maleny (57.1%) and Tallebudgera (56.9%), while borrowers now need an extra $11,567 (up 67%) to meet their home loan commitments compared to December 2020.
PEXA’s head of research, Mike Gill, said with interest rates continuing to rise and the cost of living squeezing the budgets of households, there has been a pronounced spike in the number of families facing more immediate mortgage risk.
Mike Gill said, “In addition to these factors, with an estimated 800,000 fixed-rate loans due to expire in 2023 – and reset at a significantly higher cost – it’s easy to see why refinance volumes are at a record high as mortgagees seek to strike a better deal. It’s clear that lending pressure is set to stay in the months ahead.”
The report calculated mortgage stress by assessing the median monthly home loan repayments as a proportion of the median monthly family income for each postcode, before categorising the risk into low (0-20%), moderate (20-40%), high (40-60%), or very high (>60%).
The dangers of buy now pay later for homebuyers
Buy now, pay later services that allow consumers to make purchases and spread the cost of items over several interest-free instalments have grown in popularity over the past few years. However, for homebuyers, there might be risks that they are not aware of.
When lenders assess your ability to borrow, they are going to take a very close look at your entire financial situation. If you’ve been using buy now pay later services, there might be some red flags that could hurt your application.
Here are four things to consider if you’re a home buyer.
Debt-to-income ratio
Using buy now pay later services can increase your overall debt-to-income ratio, which might make it harder to get a loan from a lender. The debt-to-income ratio is used by lenders when they assess your borrowing capacity to make sure you’re not taking on too much debt. When you add your current debt to a potential mortgage, it might mean that you can only borrow a lower amount.
Lower credit score
Buy now pay later might also negatively impact your credit score, especially if you miss any payments or are unable to make payments on time. A lower credit score can make it harder for you to secure a mortgage, and it may also result in higher interest rates and fees. All lenders will look at your credit score and credit report to get an idea of the type of borrower you are and how likely you are to repay a loan.
Overspending
Buy now pay later can make it easy to buy things, overspend and accumulate debt, which can make it harder for you to save for a deposit on a property. Lenders will look at your level of genuine savings and if you don’t have a certain amount, they might be hesitant to lend. If you are overspending, you will also be hurting your borrowing capacity as banks will assess both your ongoing income and expenses.
Reduced access to credit
If you have an outstanding buy now pay later balance, some lenders may consider this a form of debt and be less willing to lend you money for a property. This can limit your access to credit and make it harder for you to secure a mortgage or obtain other forms of financing.
While these services can be a convenient way to manage cash flow and purchase items that you might not otherwise be able to afford, it is important to be mindful of the potential dangers associated with using them. It is particularly important if you’re looking at making a large purchase like a property in the future.
Smaller capitals the best-performed markets over 20 years
Despite property experts focussing on the larger capital cities of Sydney and Melbourne, new research has found that it has been the smaller cities of Hobart, Adelaide and Canberra that have been the strongest-performing property markets over the past two decades.
Property academic, Peter Koulizos, found that since 2002, the smaller capital city housing markets have seen more growth than the larger ones.
Mr Koulizos found that Hobart’s market has grown the most of any capital city in the country in the past two decades, with house values increasing 5.90 times, ahead of Adelaide (4.1) and Canberra (4.08). While Brisbane’s market increased 4.05 times over that period, followed by Melbourne (3.49) and Sydney (3.48).
“We always hear about the property markets of our two biggest capital cities because a large proportion of our national population live there, but when it comes to the performance over the long-term, they both are well down the leaderboard according to my analysis. According to the ABS data, Hobart was the star performer by a country mile over the past two decades, which just goes to show that smaller cities as well as major regional areas can be sound property investment locations.” Mr Koulizos said.
Mr Koulizos’ analysis found that the median established house price in Hobart was 5.9 times higher in December 2022 than it was in March 2002, with its median price soaring from $123,300 to $727,000 over the period. Adelaide was second, with the established median house price 4.1 times higher than 20 years ago with its price increasing from $166,000 to $680,000. Third was Canberra, whose median house price is currently 4.08 times more than it was in March of 2002, with its price growing from $245,000 to $999,000 over the period.
Mr Koulizos said our three biggest capital cities produced incredibly strong median house price increases over the period, as well, with Brisbane’s quadrupling from $185,000 to $750,000. While Melbourne and Sydney’s more than tripled, increasing from $241,000 to $842,000 and $365,000 to $1.27 million respectively.
Despite the strong results from most cities, Darwin and Perth lagged behind, with their established median house prices 3.16 and 3.05 times higher now than in March 2002. Darwin’s median house price is now $600,000, up from $190,000, and Perth’s median price is currently $580,000, up from $190,000 two decades ago.
“What these statistics also showed was that every capital city had periods where median house prices fell, rose, or flat-lined because of a variety of economic factors, including two major global events over the time period in the GFC and the COVID-19 pandemic,” Mr Koulizos said.
“As property investment professionals we always encourage property buyers to purchase property as a long-term investment and to do their best to ignore any temporary impacts on median prices or markets more generally. That’s because, as these results show, real estate has a proven history of performance over the decades, with our nation offering a plethora of places – capital city and regional – where homeowners and property investors can strategically purchase property.”
Five things to consider with caravan and camper financing
Over the past few years, caravanning and camping have grown in popularity. Despite international travel starting to pick up again, demand for caravans is still high. When purchasing a caravan, your finance options are very similar to that of a car loan. However, there are some key differences that you should factor in. Here are five aspects of caravan and camper loans that you should know before committing:
Different interest rates
Caravan and camper loans come with various interest rates, which are typically dependent on the lender, the type of loan and your credit history. One of the most important factors affecting the interest rate is whether the loan is secured or unsecured. A secured loan is backed by an asset, in this case the caravan. This means if you default on payments, the lender can repossess your caravan. Secured loans typically come with lower interest rates, while unsecured loans – which do not tie the loan to the asset – tend to have higher rates.
Loan terms
Caravan loan terms can range from a few years to around seven, which is similar to a car loan. While shorter loan terms result in higher monthly payments, you’ll ultimately pay less interest over the life of the loan. Finding the right loan term for you is something you should discuss with your finance broker. Borrowers can also choose between fixed and variable-rate loans. Fixed-rate loans offer repayment certainty, while variable-rate loans will change with market conditions. Variable loans often provide more flexible payment options and the ability to be paid off sooner.
Options and extras
When you buy a new car, there is always the possibility of adding extras and upgrading features. The same is true of caravans where you can include things like additional bedding areas, plumbing or furniture and appliances. Typically, these extras can add thousands of dollars to your overall cost, so it’s important to account for these extras when applying for a loan.
Creditworthiness
There might still be financing options available to you to purchase a caravan even with a poor credit rating. However, your credit score and report will be something a lender takes into account when determining your interest rate and whether to approve the loan or not. Prior to applying for finance, it’s always a good idea to try and improve your credit score and focus on making payments on time (or early) on your current loans, credit cards and other bills.
Dealer finance
When shopping for a caravan or camper, you will normally be offered some form of in-house financing from dealers or manufacturers. While these loans can be convenient, they might also come with higher interest rates and more restrictive repayment terms.
It’s always a good idea to speak to a finance broker before you start the search for a caravan or camper to compare your options and try to get preapproved for finance. This way you will know you’re getting the best loan for your personal situation and have a clear idea of how much you can spend.
