Prolonged Listings and Stagnant Sales
The property market in Australia is cooling, with more properties staying on the market longer due to rising interest rates, decreased borrowing capacity, and a shift in buyer preferences. Older listings, or those unsold after six months, have increased significantly in Sydney (6.4%) and Melbourne (11.3%). Overpriced homes and properties needing renovations are often overlooked by buyers who are now more discerning and cautious in a tougher economic climate.
Rising Interest Rates and Reduced Borrowing Power
The Reserve Bank of Australia’s interest rate hikes have sharply reduced buyers’ borrowing capacity, with dual-income households now qualifying for $307,000 less in loans than in 2022. This reduced capacity has led many to seek more affordable options, creating a divide in the market. Entry-level and mid-tier properties remain competitive, while higher-end homes, especially in cities like Sydney and Melbourne, have seen prices fall more steeply.
Mounting Mortgage Stress
As the cost of living rises, mortgage stress is escalating. Nearly half of mortgage holders report feeling financial pressure, particularly younger buyers, who are increasingly stretching their budgets to secure homes. Some are cutting back on basic needs or other expenses to make mortgage payments. With the RBA keeping rates steady, financial relief remains uncertain, and these stress levels are unlikely to decrease soon.
Sellers Face Reality in an Evolving Market
Sellers, especially those who bought during the pandemic’s peak, may need to adjust price expectations. Properties priced too high are frequently withdrawn, discounted, or fail to attract buyer interest. Meanwhile, new regulations on rental properties in Victoria are prompting some investors to sell instead of making costly updates. This trend has added to the supply of homes requiring renovation, further increasing the volume of “rugged” listings that buyers find less appealing.
Rate Cuts: Hope or Risk?
Some economists predict the RBA may cut interest rates in the coming year, which could spark buyer demand. However, historical trends show that rate cuts typically drive up property prices, potentially negating any borrowing cost savings. Buyers hoping for lower prices may find that delaying their purchase leads to increased competition and higher overall costs.
Conclusion
The Australian property market is in a period of adjustment, where flexibility and a realistic approach are essential for both buyers and sellers. Sellers can benefit from realistic pricing and understanding current buyer behaviours, while buyers may find more opportunities by focusing on affordability. As interest rates, regulations, and economic conditions continue to shift, making informed, adaptable decisions will be key for navigating Australia’s complex real estate market.
