Despite falling home costs due to higher interest rates, youthful Australians are being shut out of the market.
According to the latest statistics from the Australian Bureau of Statistics, the number of people purchasing their first house in January fell by 8.1%, reaching its lowest since February 2017.
Six years ago, in that very same month, the Australian Prudential Regulation Authority declared an assault on interest-only and investment loans, which triggered a decline in the housing market.
In January 2021, two months after the Reserve Bank of Australia reduced interest rates to a record low of 0.1 percent, there was a sharp increase in the percentage of first-home purchasers who intend to reside in the house they are purchasing.
Since then, they have dropped every month except one. It was the case even before the RBA increased rates in May 2022, the first time they had done so since November 2010.
Due to the summer break, the board did not convene in January, so the statistics only covered the first eight straight monthly rate hikes by the Reserve Bank.
In February, the Reserve Bank of Australia (RBA) increased interest rates to a 10-year high of 3.35 percent. All four of Australia’s significant banks anticipate another rise next Tuesday, bringing the rate to 3.6 percent.
According to projections from Westpac, ANZ, and NAB, the Reserve Bank is expected to increase interest rates three more times, in March, April, and May, to an 11-year peak of 4.1 percent.
As rising interest rates weigh on homebuyers’ wallets, the Australian Prudential Regulation Authority (APRA) has mandated lenders determine whether clients can comfortably afford a 3% rise in their variable mortgage rate.
According to Canstar’s calculations, a creditor with a median full-time income of $94,000 has a maximum borrowing capacity of $436,000.
A home or condo in the $545,000 range is out of this person’s price range with a 20% down payment.
According to statistics collected by CoreLogic in February, the typical unit price in Melbourne was $585,366.
Even after accounting for a 10% yearly drop, it was significantly less than the median Sydney apartment price of $769,733.
It means that a first-time buyer with a typical income would have to settle for a smaller house (with fewer bedrooms) or move farther from the heart of town.
Perth, with a median house price of $587,274, and Darwin, with a comparable midpoint of $585,836, both price out would-be middle-income homebuyers.
The typical home price in flood-stricken Lismore, on the far north shore of New South Wales, has dropped 24.8% in the past year to $403,430, so they do have some choices.
The Reserve Bank of Australia discontinued its $188 billion Term Funding Facility, through which it loaned money to banks to provide low-interest mortgages in 2021, dampening demand from first-time homebuyers.
The ABS’s director of finance and wealth data, Mish Tan, attributed the early decline in first-home buying activity to dismantling influenza relief measures rather than increasing interest rates.
She explained that the drop happened simultaneously and that “COVID-19 pandemic stimulus measures were being wound down.”
However, rising interest rates in 2022 kept would-be entrants out of the housing market.
Lenders’ ‘anecdotal input indicated decreased financing capability due to increasing interest rates further hampered total demand for new home loans in recent months,’ Ms. Tan said.
