Some recent Australian homebuyers say they are willing to accept falling property values if a weaker housing market makes home ownership more accessible to people locked out of the market.
Queensland couple Alex Hogan and his partner bought a block of land after struggling to enter the established housing market. They are now facing higher construction costs and a lower expected value for their finished home, while also weighing whether they can afford to have another child.
Despite the financial pressure, Hogan supports further action on housing affordability. He said it was important to maintain momentum on the issue rather than allow the problem to return to the background.
Their experience comes as Australian property prices have fallen from their recent peak. Australia By Aussie has previously reported on the housing downturn, including the debate over negative equity and the expectation from ANZ chief economist Richard Yetsenga that the property correction had further to run.
Prices around Australia have fallen 3.6% from their peak earlier this year, according to Cotality data cited by Guardian Australia, with Sydney recording some of the steepest declines. Some analysts have forecast falls of more than 10% as higher inflation increases the prospect of further interest rate rises.
For some newer homeowners, falling prices can create financial stress, particularly if they need to refinance or sell. But the people interviewed for the Guardian article said they were prepared to absorb some of that loss if it helped reduce the gap between homeowners and long-term renters.
Melbourne junior doctor Eibhlinn Cassidy, who bought an apartment two years ago, said they would accept a financial loss if it contributed to a long-overdue adjustment that allowed more people to enter the market.
Economist Terry Rawnsley said many recent buyers may be able to wait out the downturn if they do not need to refinance or sell. He expects prices could begin rising again once the Reserve Bank starts cutting interest rates, which he expects could happen in 2028.
Canberra business owner Remy Coll has faced a different problem after falling prices made it difficult to sell his previous home. He bought a property in Canberra’s inner north earlier this year and intended to sell his old home, but the decline in values left him holding two properties and paying two mortgages.
Coll said he did not want to become a landlord, but believed the government was right to pursue measures aimed at improving housing affordability. He said a period of lower prices could be painful for existing owners while potentially helping younger Australians afford homes in the future.
The experiences highlight the difficult trade-off created by a falling housing market: lower prices can reduce the value of existing homes while also improving the prospects of buyers who have been unable to enter the market.
Source: The Guardian