Higher interest rates could hit Australia’s most mortgaged regions harder, according to CoreLogic.
Eliza Owen (pictured above), CoreLogic’s head of residential research Australia, said of the Reserve Bank’s 400-basis-point hike since May 2022, around 350bp will have been passed through to outstanding variable-rate customers by the end of this month.
And with the bulk of fixed-term home loans taken during the pandemic expiring this year, more households will be exposed to a spike in interest rates. A borrower with a $750,000 mortgage, for instance, will have to pay an additional $1,550 per month.
But households in some regions will feel the pinch more than others, Owen said.
Outer regions of major cities, particularly Melbourne, generally had the highest number of mortgaged, owner-occupier households. Wyndham led the pack with 43,807, or around 48% of households, followed by Casey – South (38,614, or 56.2% of households), and Wanneroo in Perth (38,320, or 54% of households).
Of the 25 SA3 regional boundaries with the highest number of mortgaged households, nine are in Melbourne, five are in Perth and Sydney and two are in Adelaide. The remaining four are large regional centres, including Ormeau-Oxenford on the Gold Coast, Geelong, Newcastle, and Townsville.
“Capital growth trends across these markets are an important consideration in the financial stability of the Australian housing market,” Owen said. “This is because in the event of a ‘forced sale,’ growth in home values allows a seller to come away with some capital gain or allows a mortgagee in possession to recuperate the entirety of debt on a property.
“In these dwelling markets with high mortgage volumes, capital growth since the 2021 Census has averaged 3.1%, compared to national housing market growth of just 1% in the same period. However, there is a large range in capital growth performance from 40.5% in Salisbury, to -8.9% in Gosford.”
Owen said that the majority of the most mortgaged suburbs do not exhibit capital growth trends that are alarmingly out of step with the national housing market, with some markets even posting extraordinary capital gains since the start of the pandemic, and since the Census snapshot.
“However, it is noticeable that new listings volumes are climbing in some of these markets, where the national trend is seeing a seasonal slowdown,” Owen said. “This could make it more difficult for recent buyers to make a capital gain if they are struggling to meet mortgage repayments.
“As buyer demand wanes amid higher interest costs and seasonal trends, there could be an extended downturn in some of these markets as stock accumulates, such as in Melton – Bacchus March.
“In areas such as Blacktown – North, where values have seen a strong bounce back in the three months to May, as supply creeps up, it may put downward pressure on the growth trend in the coming months.”
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