We’re sorry, this feature is currently unavailable. We’re working to restore it. Please try again later.
The average Perth home buyer can borrow $51,000 less to buy a home than two months ago, and that will worsen with the Reserve Bank tipped to lift rates another 25 to 50 basis points on Tuesday.
With more rises expected, maximum loan amounts could be cut by more than $116,000 by April next year, leaving many home buyers rethinking what they should borrow and buy as higher repayments loom.
Demand remains strong, with the median selling and leasing times both sitting at 16 days in Perth.Credit:Jason South
New research from RateCity.com.au found a family of four, where one parent works full-time and the other part-time at half the wage, on a combined annual income of $150,000 before tax, will be able to borrow an estimated $66,000 less as a result of the May and June RBA hikes. This assumes they have no other debts and minimal expenses.
However, by April next year, if the cash rate rises to 2.35 per cent as forecast by Westpac, the maximum the family would be able to borrow from the bank would be approximately $163,500 less than a year ago, before the hikes began. This will only impact people borrowing at capacity.
A single person, earning $100,000 before tax with no dependents and no debts is likely to see the maximum amount they can borrow from the bank drop by around $51,000 following the May and June cash rate hikes.
By April next year, this person’s borrowing capacity (the maximum amount they can borrow from the bank) could drop by a total of $128,700 as the cash rate rises to 2.35 per cent, if Westpac’s forecasts are realised. This includes forecast wages growth and assumes the person has minimal expenses and no debts.
RateCity.com.au research director Sally Tindall said rising rates had the capacity to put the brakes on Australia’s property market and shift it into reverse in the short term.
“We are already seeing house prices drop in Sydney, Melbourne and Canberra, with other cities likely to follow this trend in coming months,” she said.
“The latest ABS figures show new lending is on the decline, as some buyers put their plans on the shelf until they get a clearer idea of where both interest rates and property prices land.
“Just how far prices fall will depend on a range of factors, including supply and demand.
“What is almost certain is that the drops won’t be applied evenly across the country. Some areas will retain their value more than others.”
Perth’s median value has defied the national trend to increase by 0.4 per cent to reach a median of $558,000 in June according to CoreLogic’s Perth home value index. It is the seventh consecutive month of price growth.
The June figure brings growth for the 2022 calendar year to four per cent.
CoreLogic research director Tim Lawless noted the housing market’s sharper reduction in growth coincided with the May cash rate hike, surging inflation and low consumer sentiment.
“Since the initial cash rate hike on May 5, most housing markets around the country have seen a sharper reduction in the rate of growth,” he said.
“Considering inflation is likely to remain stubbornly high for some time, and interest rates are expected to rise substantially in response, it’s likely the rate of decline in housing values will continue to gather steam and become more widespread.”
The suburbs to record the biggest increase in median house sale price during June were Edgewater (up 3.3 per cent to $620,000), Riverton (up 3.3 per cent to $736,500), Kalamunda (up 2.8 per cent to $735,000), Jindalee (up 2.4 per cent to $640,000) and Padbury (up 2.3 per cent to $655,000).
Other suburbs to perform well were Alkimos, Mullaloo, Seville Grove, Shenton Park and Dawesville.
REIWA president Damian Collins said Perth’s median house price was still the most affordable of any capital city in the country.
“While increases to the cash rate will have some impact on affordability, West Australians are very well positioned to manage these costs,” he said.
Follow WAtoday on Instagram, LinkedIn, Facebook and Twitter for handpicked selections of the day’s biggest local, national and international news.
Copyright © 2022