Mortgage landscape in 2024: a mixed bag for Australian homebuyers

The Australian mortgage market is presenting a complex tableau in 2024, marked by persistence in inflation and an accompanying series of rate hikes. Rebecca Jarrett-Dalton from Two Red Shoes provides an incisive look into the ongoing trends affecting buyers and homeowners alike.

Despite a dozen rate increases, inflation is projected to remain above the Reserve Bank of Australia’s target range until 2025. Meanwhile, the housing market exhibits a contradictory picture: the prices for standalone homes continue their upward trajectory, buoyed by low inventory and high demand.

This scarcity, along with the construction industry’s woes, is nudging more first-time buyers towards units instead of houses. With Sydney’s property prices climbing, these buyers are forced to explore the city’s outskirts, even as far as the Blue Mountains, to find homes within the $800,000 price cap set by the government’s first home loan deposit scheme.

The market is particularly tough on single buyers, who struggle against the double whammy of sky-high prices and stringent lending criteria. Even government concessions seem insufficient in making property ownership attainable for them.

An interesting shift is observed in the demographic of homeowners, with female property ownership on the rise. Reflecting changing socio-economic dynamics, women now own a significant portion of Australian property, indicating a trend towards independent financial stability and investment in real estate.

For those entering second marriages, asset protection takes center stage. Many opt for financial agreements that safeguard pre-existing family homes for their children, thus altering the traditional home ownership narrative.

Despite these personal strategies, the broader enthusiasm for new constructions remains muted, given the recent instability within the construction sector. This hesitance is leading many Australians to prefer existing homes or renovations over building from scratch.

On another note, cash transactions in the property market are gaining momentum, with data indicating that a quarter of property purchases in Australia’s major states are made without financing. This shift could edge out those dependent on mortgages, further stoking the competitive fires in an already intense market.

Lastly, a segment of the population, dubbed ‘mortgage sideliners’, are biding their time, hoping for a market correction and a drop in interest rates. However, they risk being left behind as any dip in interest rates is likely to reignite the market, placing desirable properties even further out of reach.

This landscape in 2024 underscores the need for savvy financial planning and a keen eye on market dynamics for anyone involved in the Australian property market.