There’s a lot happening in the property market right now, and you’d be forgiven for thinking the news was all about property prices.<\/p>\n
Declines in values are an important story, to be sure, with values going backwards over August in all but seven of the 41 regions CoreLogic tracks.<\/p>\n
But there are several other economic indicators that reveal what’s happening with property.<\/p>\n
Rising interest rates are putting the squeeze on households<\/strong><\/p>\n The Reserve Bank has been hiking the official interest rate since May, with the latest increases meaning that a mortgage owner who bought at the current regional Australia median price of $623,011 could be up for an additional $150 a month in repayments, according to analysis from comparison website Canstar.<\/p>\n Dr Paul Mazzola, a lecturer in banking and finance in the School of Business at the University of Wollongong, said predicting when the RBA would stop hiking rates was a “guessing game”.<\/p>\n “That’s the big question that no one can answer, and the reason for that is because it takes some months before the impact of the rate rises flows through to the economy,\u201d he said.<\/p>\n “We’re still yet to feel the impact on spending from the May to August increases.<\/p>\n Dr Mazzola said that the jump in rates would likely lead to a rise in mortgage defaults, with those on low incomes set to suffer the most.<\/p>\n “There will naturally be more defaults. The big question is the extent to which those defaults will occur,\u201d he said.<\/p>\n “That’s a little hard to predict at this point, banks have been coming out saying they’re not overly concerned by the rate of defaults – banks normally expect defaults in any given year.”<\/p>\n Home lending is falling<\/strong><\/p>\n Fewer people are seeking out new mortgages, with lending for properties slipping since the Reserve Bank of Australia started hiking the cash rate in May.<\/p>\n The fall in new lending was felt across several different groups of borrowers, including first-home buyers and investors, according to the latest figures from the Australian Bureau of Statistics released in July.<\/p>\n Housing Industry Association economist Tom Devitt said that the value of loans to investors fell by 11.2 per cent to their weakest month in over a year.<\/p>\n This was followed by a 9.5 per cent decline for first home buyers, to their lowest level in over two years, and a 6.3 per cent decline for other owner occupiers.<\/p>\n There was also a 3.3 per cent decline in lending for renovations.<\/p>\n Loans for the construction or purchase of new houses fell by 4.0 per cent in July, highlighting the impact of the recent increases in the RBA’s cash rate.<\/p>\n Demand for new homes has also come off, falling by 1.6 per cent in August according to a HIA survey of major homebuilders.<\/p>\n Mr Devitt said that the fall followed a 13.1 per cent dip in July, making the two months the weakest pair of months for new home sales since the lockdowns in 2021.<\/p>\n “Sales of new homes over the past two months are reflective of a slowing in the market as the impact of the rise in the cash rate hits households,” he said.<\/p>\n “This rise in borrowing costs compounds the impact of the rise in the cost of construction.<\/p>\n