Sin city: where homeowners are borrowing less but spending more

Recent rate rises are meant to be strangling buyers’ borrowing capacity but you wouldn’t know it in these Aussie suburbs.

They have less to borrow but they’re spending more.

Home seekers in parts of Sydney have been snapping up houses at prices that blitzed previous suburb records set during the low interest rate climate of the pandemic – despite recent rate rises strangling buyers’ borrowing capacity.

It comes as housing shortages and rampant demand continue to pressure buyers to splurge.

A weaker Australian dollar and high migration have further encouraged an influx of cashed up international buyers.

Agents reported that many of these international buyers included returning expats who worked in countries with rock bottom taxation rates and strong currencies, giving them larger cash reserves than buyers backed by local jobs.

Exclusive PropTrack data revealed a relentless march upwards in home prices in the most popular Sydney suburbs over the past year, with some recording average rises of 17 per cent annually.

This St Clair home sold in October for $3.01m, obliterating the previous suburb record by more than $700,000.

Such rises were twice the rate of the recent high inflation that has sounded alarm bells for the economy.

PropTrack economist Anne Flaherty said it “was pretty amazing growth” in home prices given the current economic conditions.

The top growth suburbs over the past year were a mixed bag from the northern beaches and east out to Blacktown and the northwest, according to PropTrack.

Denistone East and Clontarf topped the list with 17 per cent growth, followed by Parklea, Queens Park, Beacon Hill and Millers Point, with growth of 15-16 per cent.

Suburb records have also be broken across the north shore and far west, including in suburbs St Leonards, Greenwich, Longueville and Duffys Forest.

This Dulwich Hill home broke suburb records two months ago after selling for $4.75m, $700,000 above expectations.

Ms Flaherty said a lack of new housing options in these areas helped drive the growth in prices.

“Opportunities to buy in these areas are few and far between so when homes come up, you see high levels of competition,” she said.

Ray White Group chief economist Nerida Conisbee said the nearly 600,000 extra people who moved to Australia over the last year offset some of the impact that higher rates would normally have on home price growth.

Housing supply, meanwhile, is not increasing fast enough to accommodate the arrivals, Ms Conisbee said, pointing to ABS data showing only 170,000 new homes were built over the year to March.

“There’s just a shortage of homes and it came up early with rents which have been rising since the start of the pandemic but really accelerated once all those additional people came,” she said. “Now that has flowed through to pricing.”

Stuart Amm, with daughter Charli, recently sold a home in Roseville Chase and said he was surprised at the level of demand. Picture: Rohan Kelly

Low unemployment was also mitigating the effect of higher rates eating into buyers’ budgets, Ms Conisbee said.

“Although it is harder for people to borrow, some aren’t particularly worried about their jobs. Unemployment remains at a 50-year low … that helps with confidence.”

Stuart Amm recently listed his Roseville Chase home up for sale and said he was surprised how much competition it attracted.

“We thought we’d be lucky if two or three people were interested, but there were 10 and we moved the auction date forward,” he said. “Then we got a high powered (pre-auction) offer and we sold. It was amazing.”

Mr Amm said he had been worried about his sale prospects because of his experiences as a buyer.

“I was worried about funding,” he said, adding that an adviser had warned banks were knocking back 60 per cent of their loan applications.

Economist Anne Flaherty said housing shortages were driving up prices.

“We knew there was a bit of topsy-turvy in the market, but I think what worked out for us was that it was a turnkey house. Nothing needed to be done.

“There aren’t much of those around, a lot of what is for sale needs work and some buyers are reluctant about those because reno costs have gone through the roof.”

His agent Craig Ireson of McGrath-Castle Cove said some of the buyers paying new record prices for properties were downsizers with plenty of equity behind them to fund their sales.

He added that there had been a steady uplift in sales to international buyers, including both returning expats and settling migrants.

“Some international buyers are really cashed up. We had one buyer who was 28 years old with $7m in cash to spend … Sometimes they come from low tax regimes, but often they are just families with a lot of money,” he said.

Mr Ireson added that the properties selling for new suburb records tended to be modern or fully renovated homes that required no work.

“They attract the most competition,” he said. “The opportunity for buyers are the homes that need work because they are not as popular.”

TOP GROWTH SUBURBS (with annual price growth, all dwellings)

1. Denistone East 17%

2. Clontarf 17%

3. Parklea 16%

4. Queens Park 15%

5. Millers Point 15%

6. Banksmeadow 15%

7. Beacon Hill 15%

8. Kings Langley 14%

9. North Balgowlah 14%

10. Darlington 14%

11 Ashbury 14%

12 Chifley 14%

13 Dundas 13%

14 Nirimba Fields 13%

15 Acacia Gardens 13%

16 Balgowlah Heights 13%

17 Belfield 13%

18 Monterey 13%

19 Narraweena 13%

20 Stanhope Gardens 13%

* Greater Sydney 8.4%

Source: PropTrack

Originally published as Sin city: where homeowners are borrowing less but spending more