Younger Australians are being priced out of the market, as rising interest rates disproportionately impact those trying to buy their first home. <\/p>\n
Equifax mortgage data shows demand has plummeted by 9.1 per cent in May year-on-year, as potential first-home buyers simply cannot afford higher repayments. <\/p>\n
Equifax executive general manager Moses Samaha warns the handbrake has been slammed on for first-home buyers. <\/p>\n
\u201cEarlier in the year, we saw that first-home buyer demand was resilient and even growing, thanks in part to the momentum from the government\u2019s 5 per cent FHB deposit scheme,\u201d Mr Samaha said.<\/p>\n
\u201cBut now, after successive rate hikes, those initial government boosts have been washed out by the realities of a high-rate market.\u201d<\/p>\n
The RBA has lifted the cash rate in three of their four meetings by a total of 75 basis points, taking the cash rate from 3.60 to 4.35 per cent. <\/p>\n
Mr Samaha said these rate hikes and rising cost of living were hurting those trying to break into the market. <\/p>\n
\u201cThere is no doubt that there is market uncertainty at the moment \u2013 rate hikes, inflation, geopolitical pressures \u2013 Australians are likely feeling this and waiting to see how this will impact their financial position at large before taking on new commitments,\u201d he said. <\/p>\n
According to Equifax, the decline has impacted every state and territory, with no growth in demand anywhere in the country.<\/p>\n
The decline in first-home buyer demand was strongest in Queensland, which nosedived 16.2 per cent year on year, and Victoria slumped 15.3 per cent year on year. <\/p>\n
Gen Z and millennials (26-35 year olds) are experiencing the largest decline in demand.<\/p>\n
Rateseeker co-founder and managing director Nick Chong told NewsWire there\u2019s a massive disconnect between what first buyers think they can afford and what the bank is willing to lend them.<\/p>\n
\u201cWhen borrowers look at affordability, borrowers to use the current advertised interest rate to work out the loan repayments and determine if they can afford to make the loan repayments,\u201d he said.<\/p>\n
\u201cIf your actual home loan rate is 6.5 per cent the bank\u2019s servicing calculator forces you to prove you can comfortably make repayments at a higher interest rate of 9.5 per cent out of your take-home pay, i.e. the lender will add a 3 per cent mandatory interest rate buffer on the actual interest rate.\u201d<\/p>\n
Mr Chong said while a 25 basis point hike from the Reserve Bank may seem small, it actually has a compounding impact making harder for first home buyers to get into the market. <\/p>\n
\u201cIt increase the gap of the required savings you\u2019ll need to have to purchase a property. There are a couple of reasons why first home buyers feel like they are swimming against the current when it comes to savings,\u201d he said. <\/p>\n
\u201cThese include the increasing cost of living, the additional capital gap created by a lower borrowing capacity, rental expenses and wage not always keeping up with inflation.\u201d<\/p>\n
\u201cIn this situation, we generally start to see more \u2018Bank of Mum and Dad\u2019 to provide a non-refundable gift used towards the deposit or first home buyers inquiring about the 5 per cent Home Guarantee Scheme.\u201d<\/p>\n
At the same time, Mr Samaha said even those with a mortgage were not refinancing.<\/p>\n
\u201cOn the refinancing front, you would expect higher interest rates to drive people to hunt for a better deal, but the opposite is happening,\u201d he said.<\/p>\n
\u201cThis drop could indicate consumer confidence is hitting a wall. Plus, with rates where they are, many people might actually be stuck. They want to refinance, but cost-of-living pressures and new loan serviceability criteria might be impacting their ability to refinance.\u201d<\/p>\n
House prices slow<\/p>\n
While it is getting harder for first-home buyers to secure finances, rising interest rates are also helping to put a cap on runaway house price growth. <\/p>\n
According to REA group, house prices across the combined capital cities are expected to be relatively flat for the rest of 2026 due to a combination of higher rates and strained affordability. <\/p>\n
Sydney houses prices are expected to decline 3 per cent by the end of the year, while in Melbourne prices are predicted to fall by 4 per cent.<\/p>\n
Brisbane and Adelaide house prices are tipped to rise by 5 per cent, while Hobart prices will grow by 6 per cent.<\/p>\n
Perth is again expected to outperform the rest of Australia, with house prices tipped to rise a further 8 per cent.<\/p>\n
REA group senior economist Angus Moore says the market is clearly cooling due to three consecutive rate hikes. <\/p>\n
\u201cHome prices in Sydney and Melbourne have declined for three consecutive months, and home prices nationally have stalled,\u201d he said. <\/p>\n
\u201cThis softness is likely to continue through 2026, as the effect of higher rates continue to flow through and tax changes weigh on investor demand.\u201d <\/p>\n
But first-home buyers will only get a brief reprieve with home prices expected to grow 5.5 per cent in 2027, slightly below the typical growth rate of about 7 per cent.<\/p>\n
But Mr Moore says relatively soft new residential construction will put a cap on falling house prices. <\/p>\n
\u201cWorking in the other direction, housing demand will continue to be supported by population inflows and income growth, as well as boosted demand from first-home buyers, owing to the expanded Australian government 5 per cent deposit scheme,\u201d Mr Moore said. <\/p>\n
\u201cOn the supply side, new residential construction remains soft. While leading indicators, like building approvals and commencements, have been trending in the right direction for the past couple of years, actual completions remain low. With rates rising, new commencements may well slow, and that limited flow of new homes will continue to place a floor under home prices.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"Younger Australians are being priced out of the market, as rising interest rates disproportionately impact those trying to…\n","protected":false},"author":2,"featured_media":750012,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[64,63,99,115817],"class_list":["post-750011","post","type-post","status-publish","format-standard","has-post-thumbnail","category-business","tag-au","tag-australia","tag-business","tag-newswire-business"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/750011","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=750011"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/750011\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/750012"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=750011"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=750011"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=750011"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}