Extended downturn could hit most mortgaged regions: CoreLogic

The Reserve Bank of Australia (RBA) lifting the official cash rate by 400 bps since May 2022 may “take some steam out” of the recent housing market recovery, according to CoreLogic’s head of research Eliza Owen.

With monthly home loan repayments increasing and the bulk of fixed-term home loans taken out during historical low interest rates during COVID-19 rolling off, households are exposed to a spike in interest costs.

For example, a mortgage of $750,000 could see monthly home loan repayments increase by approximately $1,550 per month.

However, households in certain regions may feel the pinch more than others, Ms Owen stated.

Outer regions of major cities (Melbourne in particular) generally hold the highest number of mortgaged owner-occupier households.

Wyndham leads the way with around 48 per cent of households, Casey-South (56.2 per cent of households), and Wanneroo, Perth (54 per cent of households).

Speaking to Mortgage Business, Ms Owen stated while most of these markets do not pose any red flags, there needs to be attention paid to poor capital growth performance and a surplus of listings within these markets.

“The areas that stick out are areas with relatively high listings, a higher flow of new listings, and low capital growth trends,” Ms Owen said.

“Perhaps some of the risker markets then are pockets like Blacktown-North, Gosford, Melton-Bacchus Marsh and potentially Knox in Melbourne.”

The Melton-Bacchus March area could experience extended downturn as stock accumulates amid higher interest costs, waning buyer demand and seasonal trends, while the areas such as Blacktown-North (where values have risen in the three months to May) could see downward pressure on the growth trend in the coming months.

“Ultimately, there is no evidence of wide-scale distressed sales, with APRA data showing the portion of outstanding housing credit in 90-day arrears was still below 1 per cent (0.7 per cent to be exact) and still lower than at the onset of the pandemic (when the arrears rate was 1.1 per cent at June 2020),” Ms Owen further stated.

“However, this kind of data helps highlight the markets to watch as we move through the rate-hiking cycle.”

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