Distressed listings fall in all capital cities

The number of distressed listings has fallen substantially over the past year, as mortgage holders weather the interest rate storm and look forward to potential cuts later this year.

According to the latest data from Domain, despite concerns of a fixed-rate mortgage cliff in 2023, the percentage of distressed listings has fallen in every capital city.

In Perth, the level of distressed listings dropped to a record low in February, making up just 1.6 per cent of total listings, down from 3.7 per cent at the same time last year.

Distressed listings are identified via pattern matching and looking for keywords such as distress, urgent sale and mortgaged repossessed.

In Darwin, the volume of distressed listings fell to a 26-month low of 4.6 per cent in February, down from 5.4 per cent in January and 7.3 per cent a year ago.

In Sydney, distressed listings made up 2.8 per cent of all listings in February, down from 4.6 per cent in February 2023, while Melbourne recorded a 22-month low, with distressed listings falling from 2.1 per cent of all listings in February 2023 to 1.4 per cent last month. 

Distressed listings have dropped from 6.8 per cent in February 2023 to 4.5 per cent last month in Brisbane, while in Adelaide, they’ve fallen to 0.9 per cent.

Canberra has the same proportion of distressed listings as Adelaide, while in Hobart, distressed listings make up 0.7 per cent of total listings, which is the lowest of the capital cities.

Domain Chief of Research and Economics Dr Nicola Powell said last year’s fears about the fixed-rate mortgage cliff were valid, but the outlook had changed a lot since then.

“It’s still heightened in the early part of this year, but all of the pieces of information that we have shows that people are adjusting their budgets in order to meet their mortgage repayments,” she said. 

“I think it’s still challenging for households, and we can’t underestimate the impact of higher rates, and what it means is people have less ability to save.

“So the propensity to save has dropped to 1.1, so that means that we’re saving a very small proportion of our income at the moment compared to what we had been.”

Dr Powell said Australians were good at redirecting their income into the most important areas, which was their mortgage.

“Owner-occupiers will do everything they can to meet their mortgage repayments – cost cut or eat beans on toast.

“They will do everything in their power to really be able to meet those repayments.”

Dr Powell said banks were also willing to work with mortgage holders to help them meet their repayments. 

“Banks don’t want you to go into a mortgage repossessed situation, because it’s highly costly for a bank as well,” she said.

“There would be a number of homeowners that are working with their banks through this challenging period for them, you’ve also got the dynamic of a fully recovered housing market

“So if some people are in the position that they have to sell off their property, it actually minimises any losses that could be incurred because the market has fully recovered.”

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Kylie Dulhunty

Kylie Dulhunty is the Editor at Elite Agent.