Weeks after the Reserve Bank of Australia warned about increasing mortgage stress levels in the country, it was confirmed through a research that the majority of Australians trying to enter the market are indeed bearing the brunt of loan costs.
A study commissioned by customer-owned Gateway Bank showed that 56% of Aussies consider their home loan to be a burden – defined as limiting their lifestyle.
“In the pursuit of getting their foot into the property market, some Aussies have become over-indebted, leading us to record high household debt-to-income ratios of 189%. Add to this the steep decline in household savings, which is currently at 1%, and you have yourself a recipe for mortgage stress,” said Gateway Bank CEO Paul Thomas.
Further, it was observed that there is a shift towards an alternative means of property ownership – rentvesting. In fact, this year, 9% of those surveyed were renters who also owned investment properties. Half of those who identified themselves as rentvestors were Millennial, 38% were Gen X and 10% were baby boomers.
Thomas said that a lot of people turn to rentvesting due to increasingly strict lending restrictions and a desire for more affordable routes of property investment. However, he noted that investors opting for this method should make sure they have the proper knowledge to succeed.
“The Australian property market is flatlining for the first time in years and lending restrictions are tighter than ever before, so savvy Aussies are looking for other ways to get a foothold into the great Australian Dream.”
“It seems that for almost 10% of Aussies, rentvesting has presented an opportunity to enter the property market. However, prospective rentvestors should be wary before going down this path, as it does require a lot of consideration. When we look at data from our study this year, rentvestors are under a greater deal of stress (65%) than the general mortgage holder population, which is just a small indication of the challenges presented by rentvesting.”
The research also noted that Adelaide residents topped the nation for mortgage stress, with 63% the residents considering their home loans to be a burden. Meanwhile, Sydney saw the lowest percentage of burdened homeowners, with only 54% being weighed down by their home loans. Joining these ranks were Melbourne (58%), Darwin (61%), Brisbane (61%) and Perth (62%).
