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At least one in 20 sellers in parts of Sydney are selling in urgency or distress, with Melbourne suburbs also affected, as experts warn mortgage stress could push numbers higher.
At least one in 20 home sellers in some pockets of Sydney are selling in urgency or distress, and experts warn that could rise as mortgage repayments jump.
Distressed Listings Rise Across Cities
In Melbourne, pockets of the city are also seeing elevated distressed listings, with sellers dropping prices and saying they must sell as experts warn the number of distressed listings will increase. The share of distressed property listings is at low levels and falling across Sydney overall, at 1.8 per cent for August, on Domain data, as home owners are likely to prioritise keeping up with mortgage payments above other spending amid the cost-of-living crisis.
But the overall figure masks pockets of weakness. In the Hawkesbury region, 8 per cent of listings were considered distressed. This was followed by the Richmond/Windsor area at 6.8 per cent, Blacktown at 5 per cent and the Merrylands/Guildford area at 4.9 per cent.
In Melbourne, Melbourne City Council, Dandenong and parts of Stonnington and Casey topped the list for distressed listings in Domain data for August, with over 2 per cent of listings in these areas noting sellers were motivated to sell, pursuing an urgent sale, drawing attention to a price drop or noting a vendor must sell. Most areas experienced a small decrease in the share of distressed properties over the past year, despite falling property prices and three rate hikes during the reporting window.
Vendors in Melbourne City Council, which includes the CBD, Docklands, North, East and West Melbourne, Carlton and surrounds, were the most likely to be looking for an urgent or motivated sale, with 2.4 per cent of listings distressed. In the Dandenong area, 2.2 per cent of listings were considered distressed. In the Casey South region, 2.2 per cent of listings were distressed, across suburbs like Cranbourne, Clyde, Rosedale and Tooradin.
Rate Hikes Increase Mortgage Stress
In parts of the western Sydney suburbs, investor buyers have dropped out of the market, home owners are taking the opportunity to upgrade and need to sell, and sellers frustrated by homes taking longer to sell are keen to secure deals. AMP chief economist Shane Oliver said distressed listings had remained low overall so far because interest rates had not yet hit a threshold that would cause significant problems for home owners, but that could be set to change.
People have been able to get by with the rate hikes so far, but obviously the longer they stay up at these levels, or go up, the higher the risk. And I think we are getting closer to that tipping point now, he said. I suspect as time goes by, distressed listings will start to go up. He said the jobs market has been strong, so many households having trouble affording their mortgage have been able to work more hours.
But at 4.6 per cent, the unemployment rate is the highest for a few years and appears to be rising, which he thought could mean more problems ahead for home borrowers, with buyers in mortgage belt areas more stretched than those in high-income areas. Mortgage stress and risk of defaults and distressed listings are probably higher for lower income earners, and they tend to be in lower price points in terms of the property market.
Jalin Realty agent Ernest Towle said the market had been falling, particularly units in the CBD and Docklands, for some time, driving sellers to consider their options. There is an increasing number of people approaching me that are interested in selling, he said, noting that investors were often willing to make a loss, hoping to minimise the pain of further falls.
They are making offers on multiple properties at the same time, and waiting to see which property comes back first at the price they want, he said. Grand Real Estate agent Dr Bhimsen Kurukundi said he found properties in the 600,000 to 650,000 dollar bracket were still selling, mostly to owner-occupier first home buyers, but those at the top end were struggling.
Most of them are owner-occupiers, he said, and thought cost-of-living increases and rate hikes were forcing stressed owners to downsize. Kurukundi thought vendors felt more pressure to take lower offers rather than holding out for more in a falling market. He thought some investors who were selling had bought recently hoping to make short-term profits, only to find flat growth exacerbated by recent legislative changes.
Vendors Face Falling Market Pressure
One vendor he knew had spent a significant amount renovating only to find the price roughly the same after owning it for five years. Casey Estate Agents agent Vas Selvaraj said there was an urgency among sellers to offload properties in the Casey South region. I do not think most people can foresee any growth in the next five years, he said, despite thinking the area was previously a good investment.
He thought rate hikes were only part of the picture, with sellers fears compounded by changes to negative gearing and capital gains tax, as well as previous Victorian land tax increases for investors and the war in the Middle East. He said vendors were increasingly willing to cut prices, and was surprised the share of listings considered distressed in Casey was so low. And I think there is still nervousness that it could go down even further.
People are still holding off, especially first home buyers. In the Richmond/Windsor area, VIBE Property selling agent Michael Mahboub thought the budget changes to investment property taxes had dissuaded potential investors from buying. He said there used to be heaps of investor buyers in his area, as many as one in two or one in three. Since the budget, he estimates the figure is closer to one in 10.
He has also seen a wave of investor sellers before the capital gains tax discount changes in July next year. He said owners keen to sell are open to adjusting their price hopes. Like always, if you are genuine about selling you will meet the market, he said. He has for sale, for example, a Windsor terrace home described online as Owners want to meet the market and sell.
Agents Navigate Buyer Hesitation
Elsewhere, McGrath Hawkesbury selling agent Greg Vincent thought some agents might use the language of distressed listings in their marketing material as a tool. In this market, the difficulty is trying to create a sense of urgency for a buyer, so that may be some of the marketing dialogue that the agents are using to try to create that sense of urgency, he said.
There are still genuine buyers in the market but they are just more considered, they are doing their homework, they are much less likely to compromise because they are worried about missing out. If the price and the market are not aligned, buyers are obviously prepared to wait for the next property to come along, he said.
The average days on market is one of the things that have become prolonged, and it does get to a certain point where owners will get to that point in time where they go, We want to get going. Ray White selling agent Marc Haddad, who sells in areas including Blacktown, said some owners had been taking the opportunity of the weaker market to sell and upgrade to their next home.
A lot of people are upsizing at the moment, so if they have purchased a property and need to settle, that is one reason they would be very motivated, he said. He said the market was competitive for sellers. For owners, they are having to be competitive in terms of pricing to sell. It has always been a very competitive market but at the moment it is even more competitive.
The decision by the Reserve Bank to increase the cash rate to a 15-year high of 4.6 per cent is set to put stretched home owners under more pressure to keep up with their loan repayments. At the same time, potential buyers have been hesitant, as property prices fall.
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smh:This story was compiled and edited by the HeadTopics newsroom and HT AI from the reports above.
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