In the media: AFR – Housing market update
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The Australian Financial Review recently asked Equilibria Finance Managing Director Anthony Landahl to provide comments for part of their piece on why certain segments of the housing market are struggling more than others and the impact this is having on borrowers.
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Nila Sweeney
Australian Financial Review: July 14th 2024
House prices in some Sydney suburbs where the median sits at $2 million or higher have dropped by as much as 7.5 per cent in the past three months, as poor affordability and uncertainty over interest rates dents demand, data from CoreLogic shows.
The price falls are being recorded in more than two out of five of Sydney’s pricier suburbs, the data shows.
Suburbs on the northern beaches and the more expensive areas of the inner south and inner west posted the largest declines, despite the broader lift of 1.1 per cent in house values in the city during the same period.
Demand for houses in inner-west Sydney suburbs such as Forest Lodge and Glebe is weakening as fewer buyers are able to access larger mortgage amounts, experts say. Oscar Colman
By contrast, a number of suburbs where houses are fetching below $2 million gained up to 7 per cent in just three months.
Tim Lawless, CoreLogic’s research director, said while Sydney’s home values continued to rise, some pockets of weakness were emerging and starting to spread.
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“Those house markets that are falling in value tend to be across the higher-end markets that were previously leading the cycle,” he said.
“I think it’s due to the combination of affordability and eroded borrowing capacity as interest rates have risen, and we haven’t seen any real income growth when you adjust for inflation, until recently.
“If interest rates rise again, we could see that weakness spread further, and I wouldn’t be surprised if we see further slowdown in growth in the next three to 12 months.”
House prices in 44 per cent, or 76 out of 173, of suburbs, where the median sits at $2 million or higher, have dropped in the past three months.
Median house values in Forest Lodge and Glebe in the inner south posted the largest decline of 7.5 per cent and 7.1 per cent respectively. Those equated to more than a $181,000 drop in the median to $2.27 million and $2.36 million respectively.
House prices in Abbotsford in the inner west, with the median sitting at $3.15 million, slumped by 5.8 per cent or down by $194,012 in just three months, while those in Concord fell by 3.9 per cent or a decline of $124,237 to $3.07 million.
Avalon Beach, North Manly, Palm Beach and Narrabeen on the northern beaches posted a drop of between 3.9 per cent and 4.4 per cent, while Darlinghurst in the city fell by 3.7 per cent.
Meanwhile, the median house value in Vaucluse tumbled by 4.2 per cent, equating to a $382,755 decline in the median to $8.8 million.
During their recent peak growth rates last year, house prices in Forest Lodge and Glebe were surging by 9.6 per cent over the quarter, while Abbotsford, Vaucluse, North Manly, Palm Beach, Narrabeen and Darlinghurst were climbing by more than 10 per cent, gaining at least $200,000 over three months.
Christian Stevens, chief executive of mortgage brokerage firm Flint Group, said the sharp reduction in borrowing capacity and economic uncertainties have whittled down demand for higher-priced properties.
“Borrowing capacity has been cut by around 40 per cent, so fewer buyers can afford those properties,” he said.
“The banks are willing to lend, but securing finance for properties in the $2 million-plus range has become more challenging.”
To afford a $2 million property, a borrower typically needs an annual income of around $325,000 or higher if they have other liabilities or dependants, according to Mr Stevens.
“The combination of higher interest rates and increased cost of living has reduced the pool of potential buyers who can qualify for large loans,” he said.
“This is particularly evident in Sydney’s more expensive suburbs, where even wealthy buyers are feeling the pinch of reduced borrowing power and higher monthly repayments.”
Thomas McGlynn, chief executive of real estate agency BresicWhitney, said there were still many buyers in the market but most were unwilling to push their limits.
“I think buyers are slightly confused with the market conditions right now and many people are worried about what might happen regarding interest rates in August and this makes them very cautious,” he said.
“In some of those areas where the median is pushing over $2 million, that price point is getting quite expensive for some buyers, so they’re hesitant to make a move if they’re concerned about what the market might bring.”
The weakness in the $2 million range was also evident in Melbourne and Brisbane. House prices in Melbourne suburbs Flinders and Caulfield, where the medians sit at $2.73 million and $2.09 million respectively, have dropped by 5.7 per cent and 4.8 per cent in the past three months.
At their peak growth rates late last year, house prices in Flinders were climbing by 7.7 per cent and Caulfield by 9.2 per cent over three months.
In Brisbane, Bulimba and Ascot, with median house prices at $2 million and $2.39 million respectively, fell by up to 2.4 per cent.
”Affordability is biting, not just in terms of the cost of a property, but also in the cost-of-living pressures which are impacting people’s serviceability and how much they can borrow,” said Anthony Landahl, managing director of mortgage broking firm Equilibria Finance.
“I think a lot of buyers are taking a fairly cautionary approach. People are looking at how much they can borrow and starting to factor in additional interest rate increases and cost-of-living pressures. They are less willing to take on large debts.“
Poor affordability and uncertainty over interest rates continued to divert demand for middle-priced properties across Sydney and towards the affordable end in other cities, according to CoreLogic.
Suburbs in Sydney’s inner south-west such as Banksia, Bexley, Arncliffe and Belmore, where their medians sit between $1.6 million and $1.7 million, were among the strongest performers in the city, with prices lifting by more than 6.6 per cent over the past three months.
In Melbourne, house prices in Balaclava, Brunswick West and Oakleigh East, with medians at just over $1.3 million, gained more than between 2.5 per cent and 2.9 per cent, defying the broader weakness in the city.
Anthony Landahl | Managing Director Equilibria Finance
This is for general information purposes only and does not constitute advice. With all of these options there are a number of considerations outside the scope of what is covered in this article that you need to understand to ensure your personal circumstances are taken into consideration.
Equilibria Finance is a mortgage broking practice specialising in delivering residential and commercial mortgage and business and asset finance solutions to the clients of financial advice and accounting practices.
