This segment is hot, and it wants to buy your property.
It looks like the property market is about to split in two again. The wealthy are about to get wealthier, and the poor are about to get a foreclosure letter from the bank.
CBA released its investor presentation last week, which included this chart showing home loan applications by household income band:
Basically, the market is almost entirely driven by the top end of town – by those earning $200K – $500K.
And those wealthy folks are piling into to investment properties. What do they know that we don’t?
Real estate boss John McGrath also reckons he’s noticed to top end of town heating up.
…“There’s certainly been more pressurised selling at the lower end of the market in particular, but we haven’t seen wholesale sell-offs by banks or any of the lending institutions,” he said.
…At the upper end of the market, there were no signs of a price slowdown as more wealthy families were immigrating to east coast capital cities Sydney, Melbourne and Brisbane. The number of capital city suburbs where $5 million-plus sales were becoming normal have increased as a result.
“The top end just continues to move forward unabated. The top end of the markets is as strong as I’ve seen it ever in my 40 years of real estate history,” he said.
Good for them.
At the bottom of the market though, rate increases are starting to hurt, and the number of distressed listings has jumped in certain markets.
Distressed listings jumped sharply in pockets of Brisbane and Sydney over the past 12 months, with up to one in five homes listed under distressed conditions amid signs home owners could be struggling to meet their mortgage repayments, new data shows…
Sunnybank district, 16 kilometres south-east of Brisbane’s CBD, had the highest level of distressed listings at 20 per cent of all properties listed for sale in January. That was a 5.2 percentage point increase from a year ago, according to Domain.
The neighbouring district of Rocklea-Acacia Ridge also posted a sharp rise in the portion of properties selling under distressed conditions, lifting by 2.9 percentage points to 12.3 per cent.
Nicola Powell, Domain’s chief of research and economics, said the accumulation of rate rises and continuing high inflation might be hitting household budgets harder now than last year.
“I think for some people, that may be starting to bite particularly those that came off fixed-rate mortgages,” she said.
“Even though they’ve negotiated with their banks, the ongoing impacts of trying to balance the budget against high cost of living and higher mortgage repayments has become too much for some, so they’re selling up.”
It’s worth noting that this is the way it goes in every cycle. The rich get richer and the poor get poorer. (It’s almost like the system is designed that way.)
But I also think this tells us where the market is going. If the poor are selling, the wealthy are buying, because they know where we’re at in the cycle.
When rates start to come down, probably this year, then price growth will accelerate again.
Nice if you’ve got the pockets to ride out this stage of the cycle.
JG.