Opportunistic buyers are on the hunt for distressed listings


Searches on realestate.com.au suggest buyers are seeking distressed sales in the hope of snagging a bargain. But they may be out of luck.

Buyers are becoming increasingly opportunistic, according to search data, and are looking to pick up a distressed listing that someone wants to offload quickly, hopefully for a discount.

But this talks more to the number of buyers seeking a bargain than an increase in the number of sellers actually in distress, experts say.

The number of property searches with the keyword ‘mortgagee’ has soared over the past year. Picture: Getty

Over the year to October, property searches on realestate.com.au that featured the keyword “mortgagee” surged 229% compared to a year earlier, becoming the 12th most popular search term.

The jump was notably significant in Victoria and NSW, which saw a whopping 444% and 376% increase respectively.

Meanwhile, “mortgagee” searches jumped 164% in Queensland, 162% in South Australia, 120% in the ACT, 90% in Western Australia, 72% in Tasmania and 53% in the NT.

Low levels of distressed sales

Vendors aren’t typically keen to advertise a sale as being distressed or in arrears, thinking it could negatively impact their chance of securing the best price.

However, data indicates the number of lenders taking over properties as a result of mortgage arrears is minimal anyway. The 30+ day mortgage arrears rate for the September quarter rose only to 1.12%, according to Fitch Ratings.

“This is actually extremely low,” PropTrack economist Angus Moore said. “While arrears rates have picked up a little bit over the last six months or so, they’re lower than they were pre-pandemic.”

But he cautions these rates will likely increase as financial strain takes time to materialise in data.

“Obviously, people are going to get into stress before they get behind on their mortgage or list their home for sale.

“But given what’s happened to interest rates and the difficulty in servicing a mortgage, we probably will see arrears rates pick up.”

Buyers, especially investors, on the hunt for bargains

But while levels of distressed sales are low, buyers are hunting for bargains wherever they can find them.

“Affordability is a big driver of buyer demand at the moment,” said Mathew Tiller, head of research at LJ Hooker.

“Houses and units at a lower price point and renovation jobs are all popular, both in the capital cities and regional markets.

“And given the very tight rental market, many are looking to switch from tenant to homeowner, so they’re looking at the lower price point.”

Buyers are scouring realestate.com.au for bargains amid worsening affordability, while others look for opportunities from those unable to afford their repayments. Picture: Getty

Group CEO at Ray White, Avi Khan said the uptick in searches for mortgagee sales is likely coming from investors.

“I think the number of people looking for distressed sales is directly linked to the higher numbers of investors in the market. They perceive that there might be more distressed sales out there, more mortgagees out there, more people wanting to sell before Christmas.”

ABS data shows investor activity is picking up. In October 2023, investor loans rose 5% from the previous month to sit 12.1% higher compared to a year ago.

Aerial of suburban Melbourne and CBD

Investors are returning to the market. Picture: Getty

Mr Khan said he’s also seen a surge in demand for rundown homes and renovators, also driven by investors.

“With affordability such an issue, there’s definitely more opportunism in the market than there was. Buyers are being more creative as to what and where they’re buying.

“And for the first time, I’ve seen investor inquiries on homes that require renovations actually higher than homeowner inquiries.”

Prices skyrocketing for rundown homes

Paradoxically, this heightened demand for affordable homes is seeing some renovators sell for prices normally associated with spruced up homes.

In October Ray White sold 19 Billabong Drive in Crestmead near Logan, Queensland, for an impressive $494,700 after a record 161 bidders registered on the property.

The listing described the home as “uninhabitable”.

More than 160 bidders registered for this unliveable home in Crestmead. Picture: realestate.com.au

The same month a rundown home at, 26 Myall Street in Merrylands, western Sydney, attracted 25 bidders, with the house selling well above reserve at $1,640,000.

“Everyone wants something with an upside –  a mortgagee, a renovation project, a distress sale,” Mr Khan said. “People are going above and beyond trying to find those properties.”

Surge in appraisals

Agents say while they haven’t seen a big uptick in distressed sales, they’re seeing a huge surge in market appraisals, which suggests homeowners may be struggling to meet mortgage repayments.

“The number of sellers looking for price updates on their homes is through the roof,” said Mr Khan.

“People are wanting to know what their property is worth if they sell before Christmas or if they wait until January.”

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Mr Tiller said he’s also seen appraisals rise, especially from those stretched by interest rate hikes.

“Many are looking to downsize their mortgage, purchase a more affordable home and free up some cash flow,” he said.

But he thinks the higher number of listings is less about distressed sellers and more about vendors motivated by the recent surge in prices.

National home prices have now entirely reclaimed 2022’s price falls, up 5.42% year-on-year, according to the latest PropTrack Home Price Index.

This means homeowners have options, Mr Moore said.

“We’ve seen enormous price growth in most parts of the country over the course of the pandemic. So for people finding their mortgage difficult, they can sell or refinance with that big chunk of equity they’ve built up, which hasn’t always been the case at other points in history.”

The other cause for optimism protecting people from distressed selling is low unemployment, currently at 3.7%.

“One of the biggest predictors of people getting into trouble on their mortgages is not increases in mortgage costs, but losing their job,” Mr Moore said.

“Juggling increased expenses is difficult but people can often manage it. Completely losing your income is impossible to juggle.”


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