Negative equity a concern for majority of newcomers

In light of new data from CoreLogic, which reported that national home values have dropped 4.1 per cent in the 12 months to 30 November 2018, a survey of 1,500 Australians showed that those who purchased their home over the past three years are concerned about the fall in home prices, compared to 49 per cent of respondents who bought their property more than three years ago.

The survey also revealed that 62 per cent of respondents who purchased their home over the past three years are worried about owing more than their home is worth, compared to 27 per cent of respondents who bought their home more than three years ago.

Further, 68 per cent of respondents who purchased home over the past three years said they are worried that they would lose money on their property, with 48 per cent regretting what they paid for their home.

In comparison, 35 per cent of homeowners who purchased their home more than three years ago are worried that they would lose money on their home, with 15 per cent regretting what they paid for their property.

Among the most recent property market entrants surveyed by ME (those who purchased a home over the past 12 months), 70 per cent are concerned about the fall in home prices, 60 per cent are worried about losing money on their property, 57 per cent are worried about owing more than their home is worth, and 46 per cent regret what they paid for their home.

The ME research has also reported that, overall, 49 per cent of respondents said falling prices made them feel “less wealthy”, while 73 per cent said they would be more careful with their money in future.

However, the survey also found that first home buyers (FHBs) are still worried about housing being too expensive, with 77 per cent saying they’re “worried that housing is increasingly out of reach”.

When asked to predict the change in home values over the next two years, 38 per cent of respondents said prices will go up, 26 per cent said prices will fall, and 23 per cent said prices will stay the same.

According to ME, those who think prices will go up outnumber those who think prices will fall in states except NSW.

However, despite the recent fall in property prices, the vast majority of respondents  (84 per cent) agreed that housing affordability is still worsening.

ME head of home loans Andrew Bartolo observed: “There’s little point worrying about what will happen to prices short term if you’re intending to live in a property long term. Same goes for long-term investors.

“The Australian property market has seen seven price declines-recover cycles in Sydney since 1984, and all have seen prices recover, most within four years.

“When it comes to financial stress, banks take a long-term view, focusing on the strength of the economy and healthy employment rather than house prices.”

Mr Barolo concluded: “Two of the factors contributing to price falls in Sydney and Melbourne are macro prudential requirements and tougher credit assessment rules, which have tightened the supply of credit. Economic growth remains strong and unemployment is low.

“Those looking to borrow should ensure they have a strong savings history, a deposit over 20 per cent, and can demonstrate they can keep their levels of expenditure to low levels long term.”

[Related: Drop in home prices sharpest since GFC]