Property owners in mortgage-belt Sydney suburbs are feeling the financial strain, and have the highest rates of distressed sales across the city.

Thirteen interest rate rises in the past two years are taking their toll and some owners are choosing to sell their homes or investment properties before their lender forces their hand.

In the Blacktown area, distressed listings reached 13.2 per cent of total property listings in April, Domain figures show, a sharp rise from 8.7 per cent a year earlier.

Distressed listings are high in the Parramatta region at 8.3 per cent, and are at least 7 per cent of all listings in the Merrylands/Guildford, Richmond/Windsor and Fairfield areas, although each of those are slightly below their levels of one year ago.

In Sydney overall, 3.1 per cent property listings were considered distressed last month, edging back from 4.6 per cent a year ago but higher than most other capital cities – and experts warn they could rise again if interest rates stay higher for longer.

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A distressed listing is determined by a selection of keywords – like desperate seller and urgent sale – in a property advertisement that suggest the owner needs to sell quickly.

“Sydney mortgage holders are certainly under pressure. I think we’re all feeling the impacts of the higher cash rate but also the cost of living,” Domain chief of research and economics Dr Nicola Powell said.

She said Sydney home buyers have to take on larger debts to get into the city’s expensive housing market compared to other capitals, and even second home buyers may not have much equity.

The falling proportion of distressed listings meant households have been adjusting by dipping into savings buffers, picking up extra work or cutting discretionary spending. Rising Sydney property prices had also supported owners who need to sell.

But there was only so long it could last.

Higher interest rates and the rising cost of living are forcing some homeowners to sell.Credit: Peter Rae

”Now with the inflation bump it is likely the cash rate is going to stay higher for longer – the longer interest rates stay high the riskier it becomes for some families,” she said.

And with rate cuts seen as unlikely until next year, the level of distressed listings could rise, she said.

In Blacktown, Harcourts Unlimited managing director Andrew Chrysanthou said he has seen a lot more investors putting their properties on the market as there may not be as much benefit in owning them compared to when interest rates were low.

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“If it is not positively geared, and they are out of pocket by $2000, $4000, they can carry it for a while,” he said.

“[But] because of land tax, because of interest rate rises – some properties are not worth holding.”

But he emphasised that there were more buyers than homes for sale in his area, and almost all his auctions have been selling.

Ray White Parramatta principal Steven Fan said some of the urgent listings could be because his neighbourhood is a first home buyer market and when upgraders want to buy before they sell, they have a deadline to meet.

“Not so much they need to reduce the price compared to when they bought when they are selling – they have just got to meet the current market price,” he said.

“Some of my clients want to sell today because a lot of outer areas are going up and they don’t want to miss the market.”

He said generally the Parramatta market was attracting a lot of buyers for its infrastructure and affordability, but said interest rates were taking a toll on owners.

“Some could be financially stressed because, given interest rates jumping up so much,” he said.

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AMP chief economist Shane Oliver said the immense financial pressure on homeowners was largely being driven by high interest rates, as mortgage repayments reaching record levels as a share of household income.

Oliver said after cutting back on spending and dipping into savings, desperate homeowners are “tipped over the edge” and forced to put their property on the market.

”It’s usually the case that they’ve exhausted all avenues, which includes having a chat to the bank (about reducing repayments),” he said.

Oliver said many homeowners were holding out for interest rates to come down, which now looks like it could take longer.

“Unfortunately, I think things could get a little bit worse before they get better,” he said.

“Those who are just hanging in there for a cut might have been getting help from their parents wherever they can and are now suddenly faced with another six months wait. That in itself could be a factor which pushes them over the edge and they decide to sell.“

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