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.”

Former President Donald Trump said he would ban undocumented immigrants from obtaining home mortgages, a move he indicated would help ease home prices even though these buyers account for a tiny fraction of U.S. home sales.

Home loans to undocumented people living in the U.S. are legal but they aren’t especially common. Between 5,000 and 6,000 mortgages of this kind were issued last year, according to estimates from researchers at the Urban Institute in Washington.

Overall, lenders issued more than 3.4 million mortgages to all home purchasers in 2023, federal government data show.

Trump, the Republican presidential nominee, made his comments Thursday during a policy speech to the Economic Club of New York in Manhattan.

Housing remains a top economic issue for voters during this presidential election. Rent and home prices grew at historic rates during the pandemic and mortgage rates climbed to levels not seen in more than two decades. A July Wall Street Journal poll showed that voters rank housing as their second-biggest inflation concern after groceries.

Both major candidates for the 2024 presidential election have made appeals to voters on housing during recent campaign stops, though the issue has so far featured more prominently in Vice President Kamala Harris ’s campaign.

Trump has blamed immigrants for many of the nation’s woes, including crime and unemployment. Now, he is pointing to immigrants as a cause of the nation’s housing-affordability crisis. Yet some affordable-housing advocates and real-estate professionals said Trump’s mortgage proposal would fail to bring relief to priced-out home buyers.

“It’s unfortunate that given the significant housing affordability crisis that is widely acknowledged across most partisan lines, we are arguing about a minuscule segment of the market,” said David Dworkin, president of the National Housing Conference, an affordable-housing advocacy group.

Gary Acosta, chief executive of the National Association of Hispanic Real Estate Professionals, a trade organization, said, “It’s just another effort to vilify immigrants and to continue to scapegoat them for any issues that we have here in the United States.”

A Trump campaign spokeswoman didn’t immediately respond to a request for comment.

Undocumented immigrants in the U.S. can obtain an obscure type of mortgage designed for taxpayers without Social Security numbers, most of whom are Hispanic. The passage of the USA Patriot Act of 2001 allowed banks to use identification numbers from the Internal Revenue Service as an alternative to Social Security, extending a number of financial services to people without legal status for the first time.

Mortgage loans for undocumented immigrants are typically higher interest and borrowers include legal residents who have undocumented spouses, Acosta said. Lenders include regional credit unions and community-development financial institutions.

In his speech, Trump said that “the flood” of undocumented immigrants is driving up housing costs. “That’s why my plan will ban mortgages for illegal aliens,” he said.

Trump didn’t elaborate on how he would enact a ban on such loans.

Though mortgages for undocumented people living in the U.S. are relatively rare, residential real-estate purchases by foreign nationals are big business , especially in expensive coastal cities such as New York and Los Angeles. These sales have declined in recent years, however.

Close to half of foreign purchases are made by people residing abroad, while the other half are made by recent immigrants or residents on nonimmigrant visas, according to an annual survey by the National Association of Realtors. Many affluent foreigners buy U.S. homes with cash instead of obtaining mortgage financing.

In his Thursday speech, which focused mostly on other economic matters such as energy and taxation, Trump proposed other measures to bring down housing costs, including cutting regulations for builders and allowing more building on federal land. Similar ideas appeared in the housing policy outline Harris released in August .

The former president has spoken on housing-related issues in speeches at other recent campaign stops, including in Michigan last month, where he touted his administration’s 2020 overturn of a policy that had encouraged cities to reduce racial segregation .

“I keep the suburbs safe,” Trump said. “I stopped low-income towers from rising right alongside of their house. And I’m keeping the illegal aliens away from the suburbs.”

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

Since the surge in buyer activity, average monthly mortgage payments have increased almost 50 percent, new data has shown

The Republican nominee says it would help bring down home prices, though these buyers account for a fraction of U.S. home sales