Australia’s housing market is facing increasing challenges as rising mortgage arrears coincide with surging property prices.
Recent data from both the Australian Prudential Regulation Authority (APRA) and the Real Estate Institute of Australia (REIA) sheds light on the growing financial strain on homeowners, while also highlighting continued growth in the property market.
According to the latest APRA quarterly property exposure statistics, the value of mortgages that are 90 days or more in arrears has now reached $23.37 billion, representing 1.03% of all mortgages.
This marks the sixth consecutive quarterly increase in mortgage arrears, and the figure is now higher than the pre-COVID average of 0.91%.
While this percentage is still relatively low, it reflects the mounting pressure many borrowers are under following 13 interest rate hikes.
The number of mortgages that are between 30 and 89 days overdue remained steady during the June 2024 quarter, representing 0.66% of all outstanding credit.
Sally Tindall, Data Insights Director at Canstar.com.au, said it was “concerning but by no means surprising” to see the total value of mortgages in arrears continuing to climb.
“After more than two years of soaring mortgage rates, many borrowers’ budgets have been stretched to the very last dollar, while others have gone firmly into the negative.”
Owner-occupiers have been hit the hardest, with non-performing owner-occupier loans now making up 1.07% of all owner-occupier loans.
This is a higher share compared to non-performing investor loans, which sit at 0.86%.
“Owner-occupiers are more likely to fall into arrears than investors because they have fewer levers to pull to get relief. They don’t have tenants to ask for more rent, and the prospect of selling up isn’t as straightforward,” she said.
Despite the rise in mortgage arrears, property prices in Australia’s housing market continue to climb.
The latest Real Estate Market Facts report from the REIA shows that the national median house price increased by 1.5% during the June quarter of 2024, bringing it to $1,049,136.
The price of other dwellings also rose by 1.1%, reflecting continued demand in the market.
REIA President Leanne Pilkington noted the broad increases across many capital cities, with Sydney remaining the most expensive city for buyers.
“The median price for houses increased in Sydney, Brisbane, Adelaide, Perth, Hobart, and Darwin, and decreased in Melbourne and Canberra,” Ms Pilkington said.
Sydney’s median house price is $1,662,448, which is 58.5% higher than the national median.
In contrast, Darwin remains the most affordable city for house buyers, with a median price of $567,000.
The median price for other dwellings also increased, with a national median of $675,133.
Ms Pilkington noted that affordability is at its worst in almost 30 years, with 48.1% of income now required to service a mortgage in Australia.
