Despite,buying a home has not become any more affordable for many.
Gurpreet Singh Virk is a first home buyer in Western Sydney.Wolter Peeters
Instead,rising mortgage costs mean housing has become more expensive for buyers like Virk and his partner,who are locked out of the detached housing market even after price falls.
“I have only two options left:either move to a different state or buy an apartment. I missed the boat for a house in Sydney. I won’t even be able to find a house in Campbelltown,” the 31-year-old accountant said.
“If I wanted to buy a house,last year I was able to. Now I can only afford an apartment.”
Virk is not alone as the average buyer,whether on a single or dual income,has lost hundreds of thousands of dollars in borrowing capacity. A couple earning two average incomes totalling a combined $184,000 has lost $306,000 in borrowing capacity since April,Canstar analysis shows.
That couple,who could once buy a property for up to $1,636,250 assuming they had a 20 per cent deposit,now can buy a property up to $1,253,750. The figures assume the buyers slash their living expenses and borrow the maximum a bank will lend.
Their budget would still be about $160,000 short of Sydney’s median house price despite last year’s downturn,when house prices fell 10.9 per cent.
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,.
“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 suggested,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.”
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.”