What Aussies Are Doing To Cope With The Cost-of-living Crisis

Mortgage holders are limiting household spending and refinancing their loans, while a rising number of young Australians are moving back home with their parents. These are some of the ways in which people are dealing with today’s cost-of-living crisis, which has been caused by the highest inflation rate in two decades along with rising interest rates and rents, according to research by Finder.

Three in four Australians surveyed in September said they were somewhat or extremely stressed about their financial situation. This includes 84% of mortgage holders, up from 76% in September 2021. Finder says almost $15,000 in extra interest costs have been added to the annual repayments of an average Australian home loan. And that was before the Reserve Bank of Australia raised the official cash rate again this week. The RBA raised rates by 25 basis points to 4.35%. That was the 13^th increase since May 2022 and takes the cash rate to its highest level since 2011.

The research cites data from the Australian Bureau of Statistics showing the total monthly value of refinanced home loans peaked at $22 billion in June. Finder says more than 70% of refinancing borrowers were going to a new lender rather than renegotiating with the existing one. However, the savings were fairly small. On average, refinancers went from a variable rate of 5.01% to 4.78%.

Graham Cooke, Finder’s Head of Consumer Research, said “the willingness of homeowners to refinance for even marginal gains underscores the pervasive cost-of-living crisis, reflecting a desperate search for any fiscal relief.” He added that millennial homeowners were struggling the most today. “This could be a sign that they jumped in when rates were at record lows and were unprepared for an environment where rates and repayments increased.”

Finder says young renters are increasingly moving back in with their parents to escape rising rents or to save to buy a home. Unaffordable rents prompted 30% to move back home. A further 30% did so to save money for a home deposit, while 14% said the loss of a job forced a change in living arrangements. Mr Cooke said interest rate rises were actually having a higher impact on renters, given landlords typically pass on higher costs to tenants through rent increases.

Cutting discretionary spending is another method of coping with rising costs. The Finder research shows 45% of Australians have cut back on dining out or ordering home delivery, 32% are shopping around for better prices, 23% have reduced beauty and self-care treatments, and 19% have cancelled a holiday. A small proportion (3%) have moved their child to a different school with lower fees.

Refinancing advice

Mr Cooke said it was important not to rush a refinancing decision. “There is a significant gap in rates offered by different lenders for comparable loan products. The best thing you can do is take the time to review and compare your home loan options to ensure you’re getting the most competitive rate. It’s never too late to find a better home loan deal.”

Advice if you’re moving back home

Mr Cooke said there was no point ‘returning to the nest’ without changing your spending habits. “Prioritising a budget is critical. Start cutting out non-essentials and look for ways you can save money. Working out all your expenses to the smallest detail will give you an idea of how much capacity you have to save.”

Tips for cutting spending

Finder says shopping around can help reduce non-discretionary spending as well. Finder recommends that consumers consider switching energy providers and insurers, and use a high-interest account for savings. RateCity recently reported that nine financial institutions on its panel are now offering savings account interest rates that are above inflation at 5.5% or more.

Take up a side hustle

Finder research also shows 35% of Australians are earning extra income through side hustle jobs like dog walking, mystery shopping, tutoring, freelancing and ride-share driving. Popular non-employed side hustles include recycling cans and bottles, making and selling goods, selling pre-owned goods and renting out a spare room or garage.

Australia’s population growth hot spots are mostly affordable property markets on the outskirts of major cities and in regional areas, according to an analysis by PropTrack. But homes may not remain affordable for long, with most of these areas recording above-average price growth over the past five years.

Australia’s population grew by 2.5 percent to 26.8 million people over the 12 months ending 30 September, according to the latest figures from the Australian Bureau of Statistics (ABS). This was an annual increase of 659,800 people, with migrants making up 83 percent of the increase.

REA economist Megan Lieu said home prices in Australia’s population growth hot spots are growing at an above-average pace due to strong buyer demand. However, median prices in the SA3 regions she analysed are still more affordable than their nearest capital cities or major regional cities.

Wyndham, on the western edge of Melbourne, recorded the strongest population growth over the past five years with almost 41,000 more people living there today compared to June 2018. In NSW, Blacktown–North in western Sydney had the highest growth with almost 36,000 new residents. In Queensland, Ormeau–Oxenford in the Gold Coast’s northern suburbs gained almost 28,000 new residents, with Ms Lieu noting it was a popular market with interstate and international migrants.

Ms Lieu said the worst housing affordability in three decades may be driving population growth in areas with lower median values.

“A potential factor contributing to this trend is that homes in a majority of these regions are generally priced lower than their broader greater capital city area (GCCSA),” Ms Lieu said. “This is evident when we look at the current median sale price of homes in these SA3s. Over 60 percent of them sold for less than the median in their respective city or regional area.”

Ms Lieu said other drivers of these areas’ strong population growth could be local councils zoning large swathes of land for home development.

“They tend to be in peripheries of cities where more new homes are being built relative to other areas. The increase in the supply of homes could be contributing to more competitive pricing.”

However, these competitive prices are attracting more demand than supply, leading to strong price growth. “All except four of the SA3 regions have experienced larger price growth in the past five years compared to their corresponding city or regional area,” Ms Lieu said.

The price growth differential is more than 20 percent in some regions, such as Rouse Hill-McGraths Hill in Sydney, Ormeau-Oxenford in Queensland and Fleurieu-Kangaroo Island in South Australia.

Median house prices have moved up dramatically in many of the individual suburbs within the SA3 population hot spots. For example, the median house price in the suburb of Ormeau on the Gold Coast in Queensland is $830,500, according to PropTrack data. It has risen 7.9 percent over the past 12 months and skyrocketed 68 percent over the past five years. The median house price in the suburb of Rouse Hill in north-west Sydney is $977,500, down 2.5 percent over the past year but up 30 percent over five years. The median price in the Melbourne outskirts suburb of Wyndham Vale is $585,000, up 2.5 percent over the past year and 26 percent over five years.

Another factor driving strong price growth may be the increasing lifestyle appeal of these particular areas over the past five years. For example, Ormeau is close to Westfield Coomera, which opened in 2018, and has benefitted from numerous M1 road upgrades between Brisbane and the Gold Coast. Rouse Hill has its own station on the Sydney Metro Northwest rail line, which began running in 2019.

Ms Lieu said it was likely that more Australians would seek cheaper homes in city outskirts areas and the regions as property values continue to grow amid a continued forecast housing undersupply.

“With supply unable to meet continued strong housing demand, home prices may experience further upward pressure,” Ms Lieu said.

Top 3 areas for highest population growth over 5 years

NSW

Blacktown–North, Sydney 36,233 (new residents since 2018)

Bringelly-Green Valley, Sydney 27,741

Rouse Hill-McGraths Hill, Sydney 21,821

VICTORIA

Wyndham, Melbourne 40,833

Melton-Bacchus Marsh, Melbourne 35,818

Casey-South, Melbourne 33,191

QUEENSLAND

Ormeau-Oxenford, Gold Coast 27,719

Brisbane Inner, Brisbane 16,465

Springfield-Redbank, Ipswich 15,326

SOUTH AUSTRALIA

Playford, Adelaide 6,997

Charles Sturt, Adelaide 6,410

Fleurieu-Kangaroo Island, regional South Australia 5,504

WESTERN AUSTRALIA

Swan, Perth 16,959

Wanneroo, Perth 14,885

Mandurah, regional Western Australia 11,156

TASMANIA

Hobart-North East, Hobart 2,723

Devonport, regional Tasmania 1,926

North East, Launceston-North East 1,728

Source: PropTrack, SA3 regions with highest population growth over 5 years

What Aussies Are Doing To Cope With The Cost-of-living Crisis

Limiting spending, refinancing loans, moving back home with mum and dad and working a side hustle are popular options being adopted today

Refinancing advice

Advice if you’re moving back home

Tips for cutting spending

Take up a side hustle

While demand for affordable housing is attracting more Australians to fringe suburbs, some are seeing value in regional tourist hotspots