Early signs Melbourne’s slowing property market is shrinking mortgages have emerged in a new housing affordability report.
The latest Adelaide Bank and Real Estate Instiute of Australia Housing Affordability Report showed Victoria’s average household is now spending just more than a third of their income on paying the mortgage — down 0.5 per cent across the three months ending in September.
While the figure was still up on the same time last year, REIA president Malcolm Gunning said mortgages — and consequently house prices — were expected to continue shrinking until the banks loosened the purse strings on home lending.
“This is probably the first sign of the size of loans being reduced because you can’t borrow as much,” Mr Gunning said.
“But the stats are retrospective, I would think that when we look back at the final quarter of 2018 we will see a further fall.”
CoreLogic earlier this week revealed Melbourne’s median house value had fallen every month for the past year.
Mr Gunning said September had marked the beginning of the turn in sentiment among homebuyers.
“Now those who are in the market believe they should be getting a discount,” he said.
Melbourne’s auction clearance rate has been below 50 per cent since October.
The average household would be likely to be pouring additional disposable income into their home loan, and using redraw facilities if need be, if they had a lower mortgage.
Consequent reductions in interest paid to the banks would likely erode profits for lenders.
The report also found rent was now costing 23.4 per cent of household incomes, a rise from the same time last year.
It also noted fewer first-home buyers — considered one of the few remaining driving forces in Melbourne’s property market — were taking out loans in the timeline as well.
Their numbers across Victoria decreased from close to 9000 in September 2017 to 8601 in the latest figures.