Distressed housing sales rise as owners succumb to Australia’s rising interest rates

Distressed housing listings are on the rise as mortgage holders struggle under the weight of seven consecutive interest rate hikes.

The number of homeowners selling properties under distressed conditions has risen by about 15% since interest rates began to increase in May, SQM Research found, at the same time the housing market is slowing.

In the past month alone, distressed listings, where the seller is forced into making a loss or accepting a lower price than they usually would, jumped by 5.7% nationally, with increases of 7.8% in New South Wales and 7.5% in Queensland.

The chair of the Property Investors Council of Australia (Pica), Nicola McDougall, said many homebuyers and investors overpaid for properties in boom market conditions last year - believing interest rates would stay low until 2024 - and were now feeling the pinch of spiking mortgages.

"It's not surprising that we're starting to see an increase in distressed sales because of the sharp increase in interest rates this year," she said.

"Mortgage repayments have increased so significantly in such a short space of time, which is starting to cause financial harm to many people, and especially those homebuyers who perhaps borrowed too much."

The 2022 Pica investor sentiment survey found nearly 17% of investors had sold a property in the two years to August, with a further 19% indicating they had intentions to sell in the year ahead.