Melbourne suburbs with the most distressed property sales
Cost-of-living pressures have left some homeowners struggling to pay their mortgages, with Dandenong and the CBD recording the highest percentage of distressed listings in Melbourne.
Both areas recorded more than double the number of distressed listings than the Melbourne-wide average of 1.3 per cent in April, Domain data shows.
Although the number of urgent sales has eased from a year ago when it was 2.2 per cent across Melbourne, experts warn that if interest rates stay high, distressed listings could pick up again.
The Melbourne CBD has seen a slight increase in distressed selling from last year, with 2.7 per cent of properties for sale in distress. A distressed listing is determined by a selection of keywords – like desperate seller and urgent sale – in a property advertisement that suggest the owner needs to sell quickly.
In Dandenong, that figure is 2.8 per cent. Although lower than last year, homeowners are feeling the pressure of interest rates and struggling to make mortgage repayments, Ray White Dandenong director Ben Jusufi told The Age.
“What we’re seeing now is anyone that bought sort of two to three years ago – when interest rates were around two to two and a half per cent – we’re starting to see a lot of those vendors requesting appraisals and wanting to sell their property,” Jusufi said.
Financial pressures have forced some homeowners to sell. Credit: Stephen McKenzie
“Now that’s [interest rate] tripled, and they simply don’t really see the light at the end of the tunnel, unfortunately.”
Jusufi said many “urgent” sellers were downsizing or going back to renting because they couldn’t afford their mortgage for a larger house.
“When we ask the question, what’s the what’s the reason behind selling, some will be transparent or advise that interest rates are just simply too high, and they can’t afford the repayments ... they’re really feeling the pinch because they’re paying thousands of dollars per month.”
AMP chief economist Shane Oliver agreed the immense financial pressure on homeowners was driven by high interest rates, with the cost of mortgage repayments reaching record levels as a share of household income – and said more owners could be hit if rates stay high.
Oliver said after cutting back on discretionary spending and dipping into savings to help service mortgage repayments, desperate homeowners are “tipped over the edge” and forced to put their property on the market.
“All of the evidence from community groups that offer support to distressed households suggests that there has been a massive increase in requests for help, which would suggest very high levels of mortgage stress,” he said.
Oliver said that many homeowners were “holding out” for interest rates to come down and have been forced to turn to external help to fund mortgages, including the bank of mum and dad.
“Those who are just hanging in there for a cut might have been getting help from their parents wherever they can and are now suddenly faced with another six months wait. That in itself could be a factor which pushes them over the edge and decides to sell.”
Belle Property Melbourne and Carlton principal auctioneer Scott McElroy said while their listings may not always be marked as “urgent” or “distressed”, investors in the CBD were certainly keen to sell.
“There’s no doubt that interest rates are putting upward pressure on people’s enthusiasm to continue to keep money in investment property,” McElroy told The Age.
“The majority of the more distressed sales, if that’s the word you want to use, would be occurring in the large multi-stories where there’s probably in excess of 200 apartments or 300 apartments in the building.”
McElroy said interest rates, compliance costs and increased land tax had culminated in the “perfect storm”, putting extra pressure on landlords.
The number of urgent listings was likely larger than what the Domain figures represented, McElroy said, because not all vendors advertise their motivations for selling.
“There is a lot more urgency in the marketplace to sell at the moment because of various reasons,” he said. “This percentage that’s being touted is probably conservative in the overall scheme of things.”
While distressed selling in Melbourne has remained relatively contained, more homeowners could be pushed to sell if rate cuts are dragged out, Domain head of research and economics Dr Nicola Powell said.
“It’s highly likely that the cash rate is going to be high for some time ... that could actually be a tipping point for some households to actually edge into that distressed (selling),” Powell said.
“The suburbs that will be struggling are those that bought at peak, it’s those (buyers) that are on the early part of their housing journeys ... (who) haven’t prepared themselves financially for rate hikes.”