One million Victorian households found to be in mortgage or rent stress in August: Digital Finance Analytics

Melbourne is home to some of the most financially stressed areas in the country, as more than one million households were pushed to their limit in August.

Melbourne’s CBD is home to the nation’s highest number of tenants facing financial stress. Picture: Jason Edwards.

More than a million Victorian households are in either mortgage or rental stress, but hardest hit areas are showing signs that they have survived the interest rate hiking cycle.

Digital Finance Analytics’ August report on Aussies financial stress has revealed an estimated 511,000 households in Victoria with a mortgage and which have more money going out than coming in at the moment, up from 505,000 in April this year.

There were another 571,800 rented homes where the occupants were in the same boat, also up from 552,000 earlier in the year, with Melbourne’s CBD the nation’s top spot for rental stress.

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Five of the nation’s ten most-stressed areas were in Victoria, with the area around Narre Warren at the top of the list in Vic and fifth overall in the country, with 9663 households feeling the financial pressure.

A chunk of Melbourne ranging from Roxburgh Park to Craigieburn and Mickleham was next, followed by the Pakenham area and Berwick.

An area of Ballarat including Alfredton, Lake Wendouree and Mount Clear was the 10th nationwide, with 8570 households classified as having more money going out than in.

DFA chief executive and founder Martin North said government tax cuts that kicked off in July had thus far only provided a modest reduction in mortgage stress for most Australians — and the risk of default was still rising.

His report indicated that first-home buyers and families are the hardest hit at present.

Ray White Victoria chief executive Domenic Belfiore said if there were approximately three million households across the state, having a third of that number in stress was a very high figure — but noted “we aren’t seeing fire sales”.

Ray White is Victoria’s biggest real estate group and present in almost every corner of the city, with Mr Belfiore adding that his firm’s number of listings were 18.5 per cent higher this year than at the same time in 2023.

However, with investor-owned property listing numbers accounting for 36 per cent of their listings today he said this could be concerning for rents in the future.

“So if there’s rental stress now, because of the rising rents, what will they look like in a few years time?”

Narre Warren has been named as the top Victorian area for households struggling with their finances — but that didn’t stop the sale of 8 Pinjarra Court for $675,000.

A Berwick-based broker has noted that there is growing demand for new loans in the area, which could have helped the $1.08m sale of 34 Canning Drive, Berwick.

Mortgage Choice broker David Thurmond works across Melbourne’s outer east where many of the hardest hit regions are and said that the activity in his area was slowly changing away from refinancing activity towards new loans — led by first-home buyers.

Australia’s cash rate, which underpins the interest payments on mortgages, has grown from 0.1 per cent in May 2022 to 4.35 per cent today — though has had no change since November, 2023.

Mr Thurmond said that he was “certainly hearing from clients that are under mortgage stress”, but none had been forced to sell yet and that prospect was looking less and less likely.

“I’m not surprised that people in this area may have capitalised on cheap interest rates and that they might be under some stress,” he said.

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“But if interest rates are even six months away from coming down, we are in good shape.”

Melbourne’s CBD and its immediate surrounds had the highest level of rental stress in the country, with 15,466 households of the more than 23,000 recorded for the area struggling to keep their finances in check.

Barry Plant Yarra’s Edge sales manager Geoff White said rents in the city had surged upwards as landlords grappled with rising interest rates, tax burdens and owners corporation fees.

8 Jacob Court, Alfredton, sold for $820,000 this month, showing that homes in the area are still changing hands despite tough times financially.

Craigieburn also made the list of Victorian areas where homeowners are struggling with their mortgages, but there were still buyers for 4 Peterlee Court which sold for $530,000 this week.

With many facing the prospect that muted home value growth meant they would sell at a loss despite having bought as long ago as three years, they were hanging onto properties that were actively costing them money and raising rents to cope.

However, with the city market providing more rental choice than most other areas Mr White said he believed that in the past six months the CBD’s vacancy rate had lifted and tenants could be in a slightly better position in the near future.

The areas around Tarneit and Derrimut also made the top ten nationwide for rental stress, according to the DFA report.

Mr North said the future of rents and home values were both tied to interest rates, the prospect of Australia going into a recession and a mix of employment and migration figures.

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Originally published as One million Victorian households found to be in mortgage or rent stress in August: Digital Finance Analytics