BRONWEN GORA - Interest rate rise…Home owner. / Sam Mooy Source: The Australian.
PROPERTY values have started falling in Sydney as the impact of five interest rate rises in the past seven months starts to bite.
Cheaper suburbs on the outer fringe, in the heart of first-home buyer territory, have been hit the hardest. Just over 100 suburbs – or almost 20 per cent of the metropolitan area – went backwards in the past quarter after surging ahead last year, figures from property market research firm Residex show.
The southwestern suburbs of St Helens Park, Raby, Narellan Vale, Ambarvale and Minto led the list of areas where property prices have fallen by almost four per cent since January.
Best-performed suburbs where values increased by up to 7.5 per cent were the lower north shore suburbs of Willoughby, Naremburn, Chatswood and Lane Cove, together with pockets of Bondi Junction and Kensington in the east.
Residex said the end of the first home buyer’s grant, coupled with the rush by people to upgrade, had created a two-speed market.
Of the 109 suburbs that went backwards in value in the first quarter of the year, around 70 had a median house price lower than the Sydney average of $610,000. And analysts warned further interest rate rises would force increasing numbers of first-home buyers to sell.
“Many first-home buyers helped into the market by the extra government subsidies on offer last year can’t sustain themselves in this kind of market,” Residex managing director John Edwards said.
“Housing for many ordinary people is totally unaffordable in Sydney as it is and a very small interest rate rise has quite a significant impact on these people as they can’t afford their repayments.”
Analysts said the middle to upper end of the market would enjoy continued growth throughout the year, while more affordable suburbs would take some time to readjust.
“The lower end of the property market has suffered as first-home buyer demand has dropped off, and those who have bought in those areas are now seeing higher interest rates,” BIS Shrapnel’s residential property manager Angie Zigomanis said.
“But at the same time we have improving economic conditions and employment growth, so people who’ve bought and are buying in the middle to upper end are going to continue to move into a stronger position.”
However, price growth would not be as strong as last year, as the expected rises in interest rates would make people more wary of their spending, Mr Zigomanis said.
Mr Edwards agrees, saying that throughout winter property prices would keep falling in the lower-income areas before optimism returns again in spring with fresh listings.
“The middle of the market will be fairly robust and overall not lose value but certainly the rate of growth will fall away,” Mr Edwards said.
