When it comes to prestige and luxury property in the Gold Coast, how are different buyer groups reacting to the current housing market?
As we saw more clearly towards the end of 2022, there has been a softening of the housing market compared to recent meteoric rises! This ‘return’ to a more ‘normal’ real estate market has been welcomed by many and allows for a more considered approach to real estate acquisition. Whilst much has been written about the cooling effects of interest rate rises (and the knock-on effects on mortgage rates and debt serviceability), these market forces naturally impact buyer cohorts differently. In this short article, we take a look at the effects of the current housing market upon first-home buyers, investors and subsequent buyers.
According to the CoreLogic ANZ Housing Affordability Report, mortgage payments for first-time home purchases will be higher now than when values peaked in Early 2022 due to a 225 basis point increase in the cash rate since that time. While ongoing programs like “Help to Buy” and “First Home Guarantee” are available, they may not generate the same level of first-time buyer demand as temporary schemes have in the past due to annual caps and income limits. However, first-time homebuyer activity may increase if new grants or incentives are introduced during the decline.
Investing in real estate is often seen as a ‘safe harbour’ when there is inflation and uncertainty in the financial markets. At the same time, while it is true that investors can offset higher interest rate payments as a tax deduction, they tend to be more leveraged than owner-occupiers in the first place. However, as we enter what will hopefully be a calmer year (compared with the rollercoaster that was 2020-2022), investor demand may increase in the long term when there is more clarity about mortgage rates and when price declines begin to stabilize. This is because the current rental market remains strong, with increased rental demand anticipated as overseas migration increases and gross rental yields trend higher as rents rise in many cities while housing values decline.
Non-first-time buyers are likely to continue leading the mortgage and purchasing market. In fact, they have historically made up about 48% of monthly borrowing for home purchases and may represent an even larger share of transactions in the short term as first-time buyers and investors are more sensitive to rising mortgage rates. Non-first-time buyers don’t face the same deposit requirement as first-time buyers and may be motivated to upgrade, downsize, or relocate due to the equity they have accumulated in the last few years.
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