These 10 Sydney Suburbs Are at Risk of Mortgage Default

DG Institute
DG Institute

Published 6:55 am 22 Sep 2021

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The Australian housing boom didn’t come cheap. In fact, many households are on the brink of mortgage default. 

As we have discussed here at DG Institute, the Australian housing market has experienced unparalleled growth during the COVID-19 pandemic due to a combination of factors such as the inability to travel leading to higher savings rates, historically-low interest rates set by the RBA, and a fear of missing out amid rapidly rising house prices. 

We’re seeing the highest annual growth rate in over 17 years and house prices have risen by more than 16% in the past 12 months alone. Australia’s big banks all agree that the unbridled growth rate of Australia’s property market will continue throughout 2022, and some experts believe that house price growth could potentially outstrip wage growth by tenfold. 

Discover how to find and secure properties at up to 40% below market value

However, all of this may be occurring at the cost of many Australians who have over-extended themselves financially to get into the housing market. 

New data from Finder shows that more than 50% of all mortgage holders in Australia are concerned about when interest rates rise, and 15% of Australians aren’t sure if they will have the capacity to make their repayments when they do. 

When it comes to mortgage stress, the typical rule of thumb is that any household paying more than 30 percent of their pre-tax income on their mortgage is considered under stress.  

By that definition, most of Australia is currently facing mortgage stress, with Canberrans paying 38%, Hobart residents paying nearly 39%, Melburnians paying 44.5% and Sydney residents spending nearly 60% of their pre-tax income on their mortgage. 

The over-extension of mortgage loans by many Australians has led to a heightened risk of mortgage defaults in more typically affluent areas like Sydney’s eastern suburbs, North Shore and Northern Beaches, as revealed by recent Modelling by Digital Finance Analytics (DFA) carried out exclusively for 9News

The research found that 1 in 11 mortgage holders in Dover Heights, in the Eastern Suburbs of New South Wales, is at risk of defaulting.

“These more affluent suburbs, I call it affluent stress, are not used to it. It’s a new experience for them,” said DFA principal Martin North, adding that “people are in financial stress at the moment and many of those people are going to struggle over the next few months.”

According to North, many affluent areas are precariously over-leveraged, paying exorbitant mortgages on top of having to cover the costs of their investment properties.  

“They’re very highly leveraged and unfortunately it’s becoming unglued now,” Mr North said, adding that in the twenty years that he’s been doing this research, the current situation is “the worst” he’s seen. 

The report produced by DFA for 9News identified ten of the most at-risk suburbs for mortgage default in Sydney:

Top 10 Suburbs At Risk Of Mortgage Default

1.  Dover Heights 8.86%
2.  Kirribilli 8.65%
3.  Gordon 8.64%
4.  Bellevue Hill 8.12%
5.  Darling Point 7.93%
6.  Bayview 6.69%
7.  Woollahra 6.50%
8.  Duffys Forest 6.26%
9.  Freshwater 6%
10.   Rose Bay  5.59%

Credit: Digital Finance Analytics

A unique opportunity 

The accelerated growth of Australia’s property market combined with historically low interest rates has prompted many to bite off more than they can chew. This in turn, has meant that many homeowners are backed into a corner and don’t have many options available to them. 

However, this presents a unique opportunity to not only help these homeowners out of a difficult situation, but also to secure properties in these desirable areas below market value. 

And it’s not just Sydney – the opportunity to secure similar properties is soaring across the country.

That’s why we’d like to invite you to the Real Estate Rescue Masterclass with Dominique Grubisa.

[FREE] Real Estate Rescue Masterclass

Good Debt Vs Bad Debt With Dominique Grubisa - DG Institute

Lawyer, Asset Protection Specialist and Property Educator

Dominique Grubisa is a practicing lawyer with over 25 years experience. She is a property investor and developer, an entrepreneur with businesses in Australia and Southeast Asia, a speaker, educator, writer and published author.

This column has been written for general information purposes only. It is not intended as legal, financial or investment advice and should not be construed or relied on as such.

About DG Institute

Founded in 2009, DG Institute strives to empower everyday Australians to grow and protect their wealth. Our goal is to provide direction, motivation and inspiration to our clients and help them perform at their very best. We do that through our professional services, in addition to teaching them how to grow their wealth through property and business education.

This column has been written for general information purposes only. It is not intended as legal, financial or investment advice and should not be construed or relied on as such.

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