Is the so called “mortgage cliff” a mirage?

As we approach the spring selling season, the much-publicised and anticipated “mortgage cliff,” predicted for July and then August, hasn’t yet eventuated. In fact, a recent report in the Australian Financial Review cited the Commonwealth Bank’s 30-day arrears at just 0.92%, and 90-day delinquencies at just 0.43%. This indicates that the “cliff” is far less steep than projected. The “cliff” was based on forecasts that mortgagors who took out loans when interest rates were at all-time lows during the COVID-19 pandemic would have difficulty honouring repayments once they shifted to higher rates, which have been raised by 4 percentage points by the Reserve Bank since May of last year. With the RBA having predicted $350 billion of fixed-rate mortgages expiring this year, it would appear that Australian borrowers are financially coping at this stage, no doubt to the detriment of small businesses, particularly discretionary retail. Last month, we reported that Sydney values had increased by 6.1% according to Core Logic, and moving into spring, their outlook remains optimistic. We share this opinion, and at the real estate coalface, our recent Open Homes are experiencing strong attendance, typically 20 – 40 groups for new listings, signifying there is still a strong but cautious appetite for property. On follow-up of many attendees, it seems a high percentage are still in the early stage of their real estate journey, but it is encouraging to see the numbers so strong.

On the local scene, premium property continues to set new benchmarks, and one such example was our sale of an Evans Street Rozelle residence achieving a record-setting price, close to $7m, prior to its scheduled auction. This is the third time we have sold this home over the past two decades, and on each occasion, it had set an area record. During the month of August, we sold more than 40 properties, with many achieving results above reserve prices and most within the initial marketing period.

Looking ahead, we anticipate stock levels will increase slightly as we approach the warmer months, and we don’t anticipate any significant change to the current market conditions this year.