Jasjeet Makkar,Virk’s mortgage broker and managing director at Icon Mortgages,said most of his clients had their budgets reduced much more than property prices fell.
“Everyone has had their borrowing capacity heavily impacted. A lot of the drop in prices has been offset by the reduced borrowing capacity,” Makkar said. “Effectively,it’s a lot more expensive to become an owner than what it was last year.”
Domain’s chief of research and economics Dr Nicola Powell said while Sydney had recorded the steepest annual decline in house prices,it was unlikely to fall enough to help offset a sharp rise in mortgage repayments.
“We would need to see significant a pullback in price that exceeds what we’re seeing to equal the mortgage affordability of rock bottom rates,” Powell said.
That was unlikely to happen,she said,as no downturn has erased the gains in the boom that preceded it,historic data shows.
“We’ve never seen an upswing erased by a downturn for Sydney house prices over the last 30 years,that’s never happened,it’s unlikely to erase the growth,” she said.
ANZ senior economist Felicity Emmett said this week the bank’s analysis suggesteda 30 per cent drop in prices would be needed to make housing more affordable in the higher interest rate environment,but she does not expect prices to fall that far.
Westpac senior economist Matthew Hassan said while price falls meant a smaller deposit was needed,and therefore a shorter amount of time needed to save,those benefits were being negated by rising rates and the extra money needed each month to pay down the loan.
“If you have a 10 per cent cheaper house,and a 10 per cent cheaper deposit,you still have to take into account the ongoing mortgage,” Hassan said. “So the falls aren’t enough to restore affordability in terms of higher mortgage repayment requirements.”
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Agents say housing in Sydney is more expensive across the board,despite record price declines,thanks to faster rising mortgage rates.
“Housing is still really expensive and off the back of rising interest rates people do really struggle to borrow enough money to buy property in Sydney,” Leanne Pilkington,chief executive of Laing+Simmons said.
“Everybody is saying the same thing,that ‘I can’t borrow as much money,and so I can’t afford the house that I could have afforded,now.’”
BresicWhitney chief executive Thomas McGlynn said while buyers would be able to find properties at a discounted price,any benefit has been cancelled out by increasing mortgage rates.
“Any discount would be swallowed up by extra repayments. In actual fact,repayments have probably made it more unaffordable to buy a home in Sydney,” McGlynn said.
“If you’re buying purely cash in the bank,you would be better off today in terms of buying a property ... But the majority of people buying are buying with a mortgage.”