Proof young homebuyers are getting smashed by housing affordability, cost of living
The bar for young home buyers to get into the property market has been raised massively over the last three years, a new report has found.
The supercharged surge in mortgage costs for first home buyers in just the last three years, is proof they are one group being hit hardest by Australia’s housing affordability and cost of living crisis.
According to big four accounting firm, mortgage stress is putting almost unprecedented pressure on first home buyers, of whom most are younger buyers in markets across Australia.
KMPG’s latest report on Australian property, Residential Property Market Outlook, September 2023, released on Monday, says the average first homebuyer is now forking out around half their earnings on mortgage payments.
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Just three years ago, the average first homebuyer was paying out a third of their earnings.
That paying out a third of your salary on your loan was once considering the limit of mortgage stress, shows just how much the average Australian and average homebuyer is being hit by the continued increase in housing costs.
According to the report, house prices across Australia are set to soar around 15 per cent over the next year and a half.
Unit prices across the country are expected to rise by around 10 per cent over the same period.
Record levels of immigration and a lack of supply and building pipeline are all expected to be forces pushing house prices up.
However mortgage stress impacting those down towards the bottom of the property ladder could be a factor in moderating home prices, according to KPMG.
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“Despite high interest rates, constrained supply will likely dominate the factors influencing property prices in the short term and result in continued price gains in most markets,” Dr Brendan Rynne, KPMG Chief Economist, said.
“There are some factors pushing the other way – the main one being mortgage stress. First-time buyers now need to use around half their earnings on mortgage payments – a significant rise from a third just 3 years ago.
“We estimate around $350 billion of mortgages, or half of all fixed rate credit will expire this year – covering 880,000 Australian households. The remaining 38 per cent of fixed rate credit, which includes about 450,000 loan facilities, will expire in 2024 and beyond. Some homeowners who previously locked in low rates might be unable to pay — and won’t be able to refinance to a lower and competitive rate.”
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However despite the challenges, there are suburbs that are still affordable for first homebuyers.
As the Reserve Bank of Australia’s cash rate has grown from 0.1 per cent in April 2022 to 4.1 per cent in June, where it remains steady, off the plan enquiries from first home buyers have surged.
Much of that is on the back of new stamp duty exemptions for first home buyers.
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Originally published as Proof young homebuyers are getting smashed by housing affordability, cost of living
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