Separate data from Digital Finance Analytics (DFA) also revealed that the percentage of borrowing households experiencing mortgage stress was a record high 39.1% in June, equating to 1.47 million owner occupied mortgage holders experiencing financial pressure:
Investors are most exposed, with DFA noting that “a larger number of property investors with a mortgage (51.3%) are underwater from a cash-flow perspective… which suggests investors are caught in the financial crisis headlights”.
The rise in investor stress is especially pertinent given both rents and prices are now falling.
How long will speculators hold on to these loss-making properties when prospects for capital growth are slim and the labour market is so fragile?
While announced extensions to JobKeeper, JobSeeker and mortgage deferrals will help, struggling households are still facing reduced levels of support from October.
Thus, there is the clear risk that loss-making investors, in particular, could sell in large numbers, causing a feedback loop of further property price falls and forced sales.