An interesting trend has emerged in the real estate sector - a whopping 60% of first home buyers have been financed by their well-meaning parents to make their property dreams a reality.
Interestingly, 2021 was a record year for Australia’s ninth biggest money lender, BoMaD. If statistics are correct the BoMaD loans are currently hovering at a staggering $34B mark.
In Western Sydney, Blacktown Local Government Area (LGA) and Ryde are considered hotspots for BoMaD properties, with Queanbeyan, Albury and Coffs Harbour being their counterparts in regional NSW.
The current crop of BoMaD home buyers and lenders face a steep challenge ahead of them – a slowing property market along with rising interest rates. A combination of these two factors is enough to present them with complex financial pressures.
“Our data identifies key markets across metro and regional NSW where home values are starting to fall, which increases the risk of negative equity for some previous purchasers.
The LGA of Ryde has seen a 16.8% fall in property values. We are also seeing slight dips in home prices in regional LGAs. These trends could signal that it is time to assess the
BoMaD buyers and lenders’ financial future,” says Don Harb, COO of National Property Group.
However, property values in Blacktown have surged with a jump of 34% jump between July 2020 and April 2022.
The Reserve Bank of Australia governor Philip Lowe has recently asked borrowers to brace themselves for a further rise in interest rates, given that inflation is expected to remain high for quite a few years ahead.
Interest rate rise going further into 2022 and 2023 is bound to put further pressure on money lenders and borrowers.
Given the impact increasing interest rates are expected to have on people’s borrowing power, it is probable even more first home buyers will rely upon the BoMaD for financial support.
Those who borrow money from their parents to fund a property are twice as likely to default on their mortgage within five years.
“Even though there will continue to be some downward pressure on pricing, the interest rates hikes will mean first home buyers will find it harder to enter the market. We feel there will be continuation of parents assisting their children in purchasing property which is likely to create an even greater divide in higher income earners compared to lower income groups. It is too hard to know what impact this may have, but time will tell,” says Monique Dower of Belle Property Balmain.
At a glance - Blacktown LGA
• The Blacktown LGA property values have increased by 35.5% from July 2021 to April 2022.
• 74.4% of dwellings are houses. 15.4% are semi-detached dwellings.
• Home ownership status – Blacktown LGA: 46.2% of properties are being purchased, 20.9% are being rented through an agent, 0.06% are fully owned.
• Monthly home loan repayments – Blacktown LGA: 25.1% are repayments of $1,800 - $2,399, 16.1% are repayments of $2,400 - $2,999, 13.9% are repayments of $1,400 - $1,799.
• The Blacktown LGA demographic is diverse with the main age groups being 25-34 years (15.5%), and 35-44 years (15.3%).
• A majority of people living in the Blacktown LGA are married (71.1%). 9% are a lone parent and 8.7% are a lone person.
• 55.5% of people who live in the Blacktown LGA are couples with children.
• Most (12.8%) residents in the Blacktown LGA fall within a weekly household income of between $2,000 and $2,499. 12.7% have a weekly household income of between $1,500 - $1,999.
• 42.8% of Blacktown LGA residents work full time, 17.3% work part-time, 35% are not in the labour force and 5% are unemployed.
(Source: National Property Group Neighbourhood Report data)
