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Canstar Group Executive Financial Services, Steve Mickenbecker, said higher property prices and low interest rates had been a boon for homeowners, who estimate they now have, on average, $312,973 in home equity.
“Rising property values are bad news for first-home buyers, but existing property owners are reveling in a home equity surge,” he said. “Homeowners in NSW have seen the biggest increase, lifting home equity to $407,299, followed by Victorian homeowners with $312,578.” The data also showed that homeowners with a mortgage are repaying their loan at an average interest rate of 2.9 per cent, which is down from 3.65 per cent in 2020. But two-thirds haven’t negotiated a better deal with their lender in the past year and 87 per cent haven’t switched lenders to secure a lower interest rate.
“This means they could potentially be paying a ‘lethargy tax’ and missing out on an easy opportunity to potentially save money on their mortgage,” the report said. The data also shows that 73 per cent of Australians now live in houses, compared to 66 per cent in 2020. The pandemic spurred a shift in how people live and many people opted to upsize their homes in 2021. This trend was significantly higher for families, with the preference for houses increasing from 57 per cent in 2020 to 71 per cent in 2021.
Mr Mickenbecker said the report also showed Gen Z is perceived as finding it the hardest to buy a home (37 per cent) while Baby Boomers were viewed as having it the easiest (7 per cent). Canstar analysis shows the median home in 1980 cost just $43,014, with a debt-to-income ratio of 2.6, while in 2021 that blew out to a median house price of $744,688 and a debt-to-income ratio of 6.6.
“Canstar’s results show that younger Australians are perceived as being the most hard done by when it comes to buying their first home, though I suspect the debate will continue to rage for generations to come,” Mr Mickenbecker said. “Runaway house prices in 2021 are making the task of putting together a deposit less attainable for first-home buyers.
“In introducing higher capital requirements for banks, APRA will be hoping to slow housing price growth, but with banks already charging higher interest rates for investment, it may not be enough.
“If the Australian dream of home ownership is to survive this decade we need to slow investment lending by easing the brakes on now.
“If next year is another year like 2021, there will be a need to slam on the brakes.”
The Canstar report reveals the nation’s biggest financial pain points, state of savings and property market outlook for the year ahead with opinions from more than 2000 Australian adults.
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This article first appeared on Elite Agent here.