Buy now, pay later: The busiest year in Australian property was also the riskiest

Investment in property might be seen as a long term prospect but the latest figures from CoreLogic suggest not everyone is in it for the long haul. Property sales hit a peak in 2021, with an estimated 549,000 homes sold that year, new data has shown. That means that year, 5.3 percent of all property was bought.

The Australian property data service also revealed a whopping 20 percent of residences were purchased in the past five years. Brisbane had the highest rate of stock turnover in the past five years at 24.6 percent.

The CoreLogic report by head of research Eliza Owen noted that the upswing in buying in 2021 was at one of the riskiest times in the market in recent years, with super sized mortgages to match.

“One could argue then that the many Australians who purchased in 2021 were incentivised into the market at a higher-risk time,” Ms Owen said in the Pulse report. “Average loan sizes reported by the ABS escalated quickly (up almost 18pc over the year), and buying close to the market peak means there may be higher risk of low capital returns or value loss in the face of higher debt costs.”

However, the report said home values had increased by 7.6 percent since the end of 2021. Those who waited a year and purchased during the brief market dip in 2022 fared better, experiencing almost double the capital growth returns. Those who bought since then have been slugged with consecutive interest rate rises as the cash rate increased 13 times over 15 months from 0.1 percent in April 2022, stabilising at 4.35 percent since November 2023.

While Roy Morgan research in April revealed that 30.8 percent or 1,560,000 mortgage holders are at risk of mortgage stress, most are weathering the storm.

“It is likely most recent home buyers are coping with the stark change in mortgage rates and economic conditions,” Ms Owen said in the report. 

“In the March Financial Stability Review, the RBA reported around 1 percent of home loans were in negative equity, and APRA reported just 1.6 percent of housing loans had mortgage repayments that were past due. 

“Loan to valuation ratios for new mortgages generally trended lower through 2021, and over 90 percent of borrowers had at least a 10 percent deposit for new loans secured that year, providing a buffer against falling home values.”