Housing demand flat and falling

The latest Housing Finance, Australia, figures show falling demand for home loans

Spring is traditionally property buying season and real estate agents and banks will be hoping that that cliché holds true this year, with the latest Australian Bureau of Statistics (ABS) figures for August showing a seasonally adjusted fall of 3% in the number of owner occupied housing commitments.

State by state, the seasonally-adjusted fall was greatest in Victoria (6.7%), followed by the Northern Territory (5.3%), the ACT (4.3%) then NSW and South Australia (both 3.7%).

These falls are despite our record-low home loan interest rates, off the back of our record-low official cash rate.

Plenty of borrowers with no equity

The latest Roy Morgan ‘State of the Nation-Spotlight on Finance Risk’ report sheds some light onto why demand may be slowing. According to the report, approximately 6.8% (311,000) of mortgage holders in Australia have been identified as having little or no real equity in their home. This is based on the fact that the value of their home is only equal to or less than the amount they still owe, placing them at considerable risk if they have to sell or prices decline.

The state at highest risk is WA where 9.2% (53,000) of mortgage customers’ home values are less than or only equal to the amount owed, followed by Queensland at 7.5% and. All other states have a rate of less than 7%.

“With over 300,000 home borrowers having no real equity in their homes, this represents a considerable risk, particularly if home values fall or households are hit by unemployment. In addition if home-loan rates rise, the problem would be likely to worsen as repayments would increase and home prices decline, with the potential to lower equity even further,” said Norman Morris, Industry Communications Director, Roy Morgan Research.

“There are indications that borrowers in lower-value homes are among the most likely to be faced with the problem of little or no equity in their homes. Higher-value properties with a mortgage appear to be facing a much less risky position because they are likely to have had their loan longer and may have had a far larger deposit, particularly if they have traded up.”

A separate recent survey by Mortgage Choice found that 1 in every 3 first home buyers worry about managing their mortgage repayments.


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