The top 7 trends for 2024 borrowers

After a turbulent 12 months, 2024 is shaping up to be another challenging year for Aussies looking to obtain a mortgage and those already servicing one. Despite 12 rate rises, inflation remains stubborn and isn’t expected to fall to the RBA’s intended range of 2-3% until 2025. Parts of the housing market remain as robust as ever, with prices for standalone homes steadily increasing due to fierce competition and low stock levels.

This scarcity of housing combined with a construction industry in distress are major factors that are pushing more first home buyers into making the jump. However, tightened lending means these buyers are more restricted in their options than they were a few years ago.

With that in mind, here are some of the key trends to watch for in the mortgage industry in 2024:

First home buyers head for the fringes

Sydney’s property market continues to soar to new heights, with house and unit prices growing further out of reach for most first home buyers. Even with a healthy budget of $800,000 – the price cap for buyers taking advantage of the government’s first home loan deposit scheme – buyers are priced out of most of Sydney’s suburbs. Currently figures show the median price of a unit in Sydney is $817,059 while median house prices sit at an eye-watering $1,333,985. To stay within budget, first home buyers would need to search for properties on the city’s fringes on the west, south-west and as far as the Blue Mountains.

Singles are being hit hard

Singles in Sydney are facing formidable challenges when it comes to entering the property market. For the most part, property prices in Sydney show no sign of falling which presents a major barrier for those on a single income. Limited housing affordability coupled with stringent lending criteria and the high cost of living further compounds the issue.

Many singles find themselves struggling to save for a substantial deposit, and even with the Federal government’s first home loan deposit scheme and the NSW government’s waiving of stamp duty among other concessions, buying property as a single is still difficult thanks to most properties exceeding the price cap for government assistance.

Female homeowners on the rise

The rise of female homeownership reflects the country’s rapidly changing economic and social dynamics. According to census data, 35% of all households in NSW are single households. Single parent households have reached unprecedented highs. Empowered by increased financial independence and the growing emphasis on gender equality, women are no longer solely reliant on men when it comes to property ownership. CoreLogic reports that women currently own 26.8% of Australian property, with 35.7% of apartments in the hands of female owners.

Divorce trends also play a role in this change as women increasingly have the means and motivation to buy out their male partner’s share in marital property settlements. Additionally, more women are pursuing homeownership independently, heralding a broader transformation of the property market as greater numbers of women aspire to invest in real estate.

Second marriages’ effect on home ownership

Second marriages often bring complex issues regarding home ownership, especially when safeguarding assets is a priority. For individuals entering into second marriages, protecting investments or previous family homes for their existing children is a major consideration. In these cases, it’s common for couples to keep ownership of such properties separate to ensure they are inherited by their respective children rather than being factored into the new marital union.

When it comes to purchasing new marital homes, couples often enter the property market with clear financial agreements in place. These agreements ensure that the financial contributions of both partners are explicitly recognised, adequately reflect the financial realities and priorities of their second union and ensure that the new home is equitably shared. In the context of mortgages and property ownership, the importance of effective financial planning and communication when blending households in second marriages can’t be understated.

Appetite for new builds remains dampened

The appetite for new builds in Australia continues to be subdued primarily due to a variety of factors that have left many prospective homeowners cautious about embarking on new construction projects. With construction companies folding left, right, and centre, potential homeowners are understandably apprehensive about building their new home.

With uncertain timelines, cost overruns due to the rising price of building materials, and labour shortages to contend with, many Aussies are instead opting for existing properties or considering alternative measures like renovating as a more secure and predictable pathway to homeownership.

Cash is king

Whether they accumulated cash through savings during the pandemic or are sitting on extra dough through the sales of investment properties, an increasing number of Australians are poised to buy into the market in cash. Data shows that 1 in 4 property purchases in Australia’s three most populous states are cash purchases.

Undeterred by high interest rates, these buyers are a formidable force in the property market. Consisting of downsizing Boomers and international buyers, this cohort could potentially price out buyers who rely on mortgage financing, intensifying competition for the most desirable properties and possibly driving property prices even higher.

Mortgage sideliners

A growing group of individuals often referred to as “mortgage sideliners” are sitting in the wings for longer and longer as they await more favourable market conditions. For these potential homebuyers the increasing unaffordability of homes coupled with tighter lending requirements is a major barrier to entry. Mortgage sideliners hope for a market correction and for interest rates to fall before making their move. While they continue to monitor the market for the right opportunity, mortgage sideliners risk the current market spiralling even further out of reach as a low interest rate period is sure to spark more competition for desirable properties.

Rebecca Jarrett-Dalton is founder of mortgage broker, Two Red Shoes