Prospects are grim for lower income homeowners, according to March quarter housing data from Australian Property Monitors (APM).
Its data shows that a two-tiered property market is developing in the large capital cities, driven by the less affluent areas struggling to cope with interest rate rises and exacerbated by the premium market riding high as investors redistribute share market wealth into property.
Michael McNamara, operations manager for APM, said: "It's lamentable that, whilst premium markets are booming, a further rise in the cash rate will disproportionately affect lower income earners. Premium property markets will largely take increased interest rates in their stride, but many less affluent mortgage holders will go to the wall."
McNamara believes that re-possessions, forced sales and bankruptcies will increase, following the extra burden of higher mortgage repayments
as last year's three interest rate hikes take their toll.
"This is likely to create greater social division. Confidence will continue to undermine less sought after areas, as the spectre of more interest rate rises this year looms large," he adds.
The report showed that Sydney property overall recorded negligible growth in the quarter but some premium areas, like the north shore, ran hot growing at 9% per year. Data showed that Sydney's southwest continues to decline as mortgage holders are forced to sell up.
The price of units in the city fell 2.5% in the quarter to sit at an average price of $350,328 while housing remained at $524,926 on average.
Premium areas in Melbourne have boomed, according to the report, with the top third of the market growing by 16% in the last 12 months. Unit prices remained stable, averaging $284,185, while house prices increased 2.1% from December to $375,556 on average.
Brisbane growth has reached a peak and will consolidate, while Perth and Darwin have recorded the first quarterly decline in six years.
Brisbane unit prices declined 2% to $266,411; prices declined 0.7% in Perth and managed a gain of 0.8% in Darwin. House prices moved ahead 1.4% in Brisbane and 0.2% in Perth, but Darwin saw a decline of 0.9%.
The report predicts a buoyant market in Adelaide, with growth exceeding 10% in the coming year. Unit prices increased by 3.4% in the quarter to $217,275 on average, while housing growth was more stable, moving on 1.7% in the three month period.
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