Gold Coast real estate: Worst suburbs to have a mortgage in as interest rates rise
A flood of struggling homeowners will be forced to put their homes on the market over the festive season, in the wake of the latest interest rate rise. SEE WHICH SUBURBS ARE HURTING.
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A FLOOD of struggling homeowners will be forced to put their homes on the market over the festive season, in the wake of the latest interest rate rise
The board of the Reserve Bank on Tuesday lifted the cash rate by 0.25, taking interest rates to 2.85 per cent.
It is the seventh consecutive month the rate has jumped, delivering another hammer blow to struggling Gold Coast households.
New data compiled by Melbourne-based firm Digital Finance Analytics (DFA) reveals Southport residents have now joined the ranks of those under the most pressure.
Melbourne-based analyst Martin North, from DFA, said things will get worse through Christmas.
“This is going to be a festive season where people will weigh up their options and as pressures grows they will be forced to consider alternatives like shedding their toys and then their houses,” he said.
“It will take a month or two for this latest rise (impact) to flow onto their bank accounts but the data shows people are becoming increasingly concerned about how they are going to pay for things, while others are trying to refinance their mortgages.
“There are many who are what I call mortgage prisoners who are now locked into higher rates because they have not got the leverage to get out.”
The number of households in the greater Gold Coast region experiencing mortgage stress sits at 24,000.
With owning your own home becoming increasingly difficult, more people have turned to the rental market.
Gold Coast’s rental vacancy rates remain at a record low of 0.7 per cent, forcing up prices across the city.
Mortgage stress means homeowners are spending at least 30 per cent of their income on loans. Rental stress is defined the same way.
The postcodes with the highest proportion of struggling homeowners are 4209 and 4215, home to the rapidly growing suburbs of Coomera, Pimpama, Upper Coomera and the city centre suburbs of Southport, Labrador and Chirn Park.
Rounding out the top three was 4216, home to the expensive waterfront mega mansions of Sovereign Islands, Paradise Point and Runaway Bay.
Mr North said the numbers reflected the demographic of each suburb’s residents.
“(Southport) is now struggling particularly because the properties there became more expensive (during the property boom) and the homeowners there are more leveraged,” he said.
“The average disposable monthly income there is $4400, while the average mortgage spending is $1832, or around 42 per cent which is very high compared to other suburbs.
“If you look at 4216 the proportion of spending is just 33 per cent, indicating this is a more affluent area.”
Colliers Gold Coast boss Steven King said he anticipated the city’s housing market would continue to cool following the rates rise.
“A rate rise will increase borrowing costs and reduce maximum borrowing capacities and this means home buyers and investors will have no other option than to borrow less to avoid pressures on repayments,” he said.
“If home buyers and investors trying to gain a foothold in the market are unable to secure sufficient finance, then it is likely that property prices will reduce further while downward pressure on vacancy rates will continue.”
Tuesday’s increase was the seventh consecutive month that interest rates have risen, with the 0.25 per cent hike in May the first such increase in 12 years. They rose again by 0.5 per cent monthly through September, before slowing to 0.25 in October.
Based on the new rates, monthly repayments on a $750,000 mortgage will increase by $112, adding significant stress to many household budgets.
The cost of monthly repayments at this level have now increased by $1140 since May.
Reserve Bank Governor Philip Lowe said increasing interest rates were necessary to clamp down on inflation.
“The board recognises that monetary policy operates with a lag and that the full effect of the increase in interest rates is yet to be felt in mortgage payments,” he said.
“Higher interest rates and higher inflation are putting pressure on the budgets of many households.
“A further increase in inflation is expected over the months ahead, with inflation now forecast to peak at around 8 per cent later this year.
“Inflation is then expected to decline next year due to the ongoing resolution of global supply-side problems, recent declines in some commodity prices and slower growth in demand.”
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