With Sydney dwelling values down roughly 14% from their February 2022 peak, real estate agents are beginning to see forced sellers who can no longer afford their mortgage repayments.
Tanmay Goswami – a real estate agent who sells homes in Sydney’s outer western suburbs – said distressed sellers are coming through his door stunned by the sharpest increase in mortgage rates in this nation’s history.
“We are now getting calls from lots of landlords”, Goswami told ABC News.
“They are struggling with the repayments, so they are looking to sell”.
“All the inflation and other day-to-day costs has gone up, so they can’t afford”.
However, some distressed sellers are finding that they cannot get what they paid as prices have fallen below their purchase price.
The “good” news is that Sydney dwelling values have posted a 0.2% rebound over the past eight days, according to the CoreLogic Daily index:
The “bad” news is that this rebound does not capture last week’s 0.25% interest rate hike from the Reserve Bank of Australia (RBA), nor its guidance that it will increase rates further in the months ahead.
Given Sydney is the most expensive housing market in the nation with the most indebted households, Sydney should be particularly sensitive to further rate hikes from the RBA.
Accordingly, Sydney home values should soon resume their downtrend.
The situation is especially precarious given some 800,000 mortgages (and at least 200,000 in Sydney) will this year transition from cheap pandemic rates of around 2% to variable rates that are nearly triple this level.
KPMG Australia this week estimated that people with an average mortgage of $600,000 will face a $16,500 increase in their annual repayments when switched from a fixed-rate loan to variable rates.
The financial impact will be even greater in Sydney, owing to its larger mortgage sizes.
Thus, there is the clear and present danger that forced sales will accelerate in Sydney in 2023, which will drive home values sharply lower.
Many sellers that purchased near the peak in 2021 and early 2022 also face negative equity.
