AFR Article: Wednesday 9 June 2021. Page 40.
The proportion of households struggling with their mortgage has climbed by more than 3 percentage points in NSW and Canberra during May, as sky-high home prices stretched some families to their financial limits.
More than two in five (41.3 per cent) NSW households are now in mortgage distress – a rise from 38.2 per cent in April, while 42 per cent of Canberrans also struggled – up from 38.3 per cent, analysis by Digital Finance Analytics shows.
Mortgage stress across many states has been rising since JobKeeper ended in March. In Tasmania, 56.8 per cent of households were in mortgage stress, and more than two in five in Western Australia. The rest recorded a slight drop in the proportion of distressed households.
Households are deemed in distress if they earn less than they spend. The rolling survey of more than 52,000 households was conducted at the end of May.
“The end of JobKeeper is beginning to bite and the lockdowns are not helping,” said DFA director Martin North.
“Many households in stress have less hours worked than they want, and no income growth. Bigger mortgages by first time buyers and equity drawdowns are lifting repayments as lending standards ease and more interest-only loans are being made.”
Stanhope Gardens in Sydney’s northwest posted the highest proportion of households experiencing mortgage stress, with 91.5 per cent of families spending more than they earn.
Mortgages have ballooned in the suburb after the median house price surged by 10 per cent in the three months ending May 31 to $1.2 million. In the past 12 months, house prices climbed by 15.7 per cent, CoreLogic data shows.
Households in the western Sydney suburb of Bidwill were also stretched, with 88.9 per cent earning less than they spend. Families were forced to take on bigger debts to buy a home after the median house price had risen by 9.2 per cent to $580,738 in just three months and by 16.1 per cent in a year.
Rental stress also surged across all states except the Northern Territory, where it improved marginally. In May, the proportion of households in rental stress jumped by 4.59 percentage points in Canberra, 3.46 percentage points in NSW and Victoria, and by 3.29 percentage points in Queensland.
“There was a significant rise in rental stress, as the fallout from the removal of renter protections hit, and the JobKeeper and JobSeeker support ended,” Mr North said.
The number of households in rental stress nationwide rose from 1.78 million in April to 1.95 million in May.
“The end of government support is hitting renters hard . . . more tenants are being asked to move or accept rent rises,” Mr North said.
“Some still owe rents from the past year, which were not forgiven, just postponed in many cases.
“Investors are trying to lift rents to alleviate negative returns, adding to the pressure, and some investors are now listing their investment properties, hoping to sell into the current market rises.”
Mr North said mortgage and rental stress could worsen in the months ahead. “Until incomes rise, the conditions are set for more pressure on household finances.”
