MORTGAGE HOLDERS DEFYING PREDICTIONS AND MANAGING DEBT

The number of home loans in arrears are less than one percent of all borrowers, defying predictions of dire outcomes from a ‘mortgage cliff’ and the impact of high interest rates and cost of living pressures.

Most borrowers are making their home loan repayments on time, and although the number of loans in arrears has increased since late 2022, they represent only a tiny portion of the market, according to the Reserve Bank (RBA). Less than 1 percent of all housing loans are 90 or more days in arrears, which is lower than the pre-pandemic peak.

In its latest Financial Stability Review released this month, the RBA said households remain under pressure from high inflation and interest rates, with consumer sentiment very weak. More Australians than usual are seeking support from community organisations, and lenders have a small but rising number of borrowers on temporary hardship arrangements.

“Based on their latest assessment of the economic outlook, banks expect arrears rates to increase a bit further from here but remain low relative to history,” the RBA said.

The RBA notes that since the start of 2022, real disposable income has fallen by about 7 percent to be near its pre-pandemic level in per capita terms. Most mortgagors have seen 30-60 percent increases in their minimum home loan repayments since rates began rising in May 2022. However, only about 5 percent of variable-rate owner-occupier borrowers today have expenses exceeding incomes, giving them a cash flow shortfall.

Households are coping well due to a strong labour market, which is allowing them to increase their hours or get a second job if necessary. They are also drawing on large savings buffers, partly created by pandemic stimulus and lower spending during lockdowns, and have reduced their discretionary spending as necessary.

The loan arrears rate is highest among highly leveraged borrowers, however it is still very small at less than 2 percent. The share of mortgagors estimated to have a cash flow shortfall combined with low savings has risen over the past two years but still represents less than 2 percent of variable-rate owner-occupier borrowers. Unusually, the arrears rate among recent first home buyers is lower than average, possibly reflecting the Bank of Mum and Dad enabling young buyers to purchase properties with less debt.

The arrears rate among borrowers who rolled over from low fixed rates to variable rates in one hit – an event labelled ‘the mortgage cliff’ which was expected to hit hardest late last year – are managing their repayments just as well as other borrowers. “This resilience partly reflects that these borrowers were able to build up savings buffers over a longer period of unusually low interest rates,” the RBA said.

High income earners are depleting their pandemic savings at the fastest rate because they tend to be servicing greater debt. But they still have the highest savings and are likely using some of it to support continued discretionary spending. Conversely, the lowest-income mortgaged households grew their savings in 2023.

The RBA says nearly all borrowers should be able to service their loans even if inflation is more persistent than expected and interest rates remain higher for longer. While the RBA expects a rise in unemployment, it noted that historically mortgagors are less likely to lose their jobs. Many mortgagor households also have multiple incomes, and about half of all borrowers have enough savings to service their debts and essential expenses for at least six months. Lenders can also offer temporary support to borrowers who lose their jobs.

The RBA said most borrowers also have strong equity positions, which protects them from default and limits risk for lenders. Rising property prices last year gave homeowners more equity and banks have been issuing fewer high loan-to-value (LVR) loans since 2021. These types of loans are now at near-historical low levels.

“The share of loans (by number or balances) estimated to be in negative equity at current housing prices remains very low,” the RBA said. “While usually a last resort and very disruptive for owner-occupier borrowers, this would allow almost all borrowers to sell their properties and repay their loans in full before defaulting.”

Hypothetically, in a severe economic downturn during which housing values fell 30 percent, the RBA estimates that the share of loans falling into negative equity would increase to about 11 percent. The RBA said significant losses for lenders would only materialise if more borrowers became unable to service their loans.

Article originally published on Kanebridge News Australia

Australia’s luxury property market is being quietly reshaped by one of the most significant wealth expansions in the world.

According to Knight Frank’s latest Wealth Report, the country’s billionaire population is set to grow by 77 per cent over the next five years, rising from 48 to 85 individuals.

That surge sits within a broader wave of wealth creation. Ultra-high-net-worth individuals, those with more than US$30 million, are forecast to increase by nearly 60 per cent to over 26,000 Australians by 2031.

Globally, the pace is accelerating. The report reveals that 89 new ultra-wealthy individuals are created every day, a figure that underscores a structural shift in capital formation rather than a cyclical upswing.

For luxury property markets, this is not just a headline number. It is a demand driver.

Australia’s wealth story is increasingly underpinned by diversification across resources, finance, technology and services, creating a depth of private capital that is both mobile and strategic.

And mobility is key. The ultra-wealthy are no longer tied to a single market. Instead, they are operating across multiple global hubs, maintaining footholds in cities like London, New York and Singapore, while using Australia as a stable base.

In this environment, real estate becomes less about shelter and more about positioning. Trophy assets remain desirable, but capital is increasingly being deployed across the full risk spectrum, from long-term holds to value-add opportunities. For Australia, the implications are clear. As wealth expands, so too does the expectation of product, and the locations that can attract it.

The billionaire effect

While property remains central to wealth preservation, the latest data shows that capital is increasingly spreading across luxury asset classes, albeit with a more disciplined approach.

Knight Frank’s Luxury Investment Index recorded a modest 0.4 per cent decline in 2025, signalling a stabilisation phase after several years of correction.

But beneath that headline number is a more telling shift. Collectors are moving away from speculative buying and toward assets defined by rarity, provenance and cultural significance.

Impressionist art led the market, rising 13.6 per cent, buoyed by landmark sales including a US$236 million Klimt painting. Watches also performed strongly, up 5.1 per cent, driven by continued demand for brands like Patek Philippe and Rolex.

At the same time, more volatile categories have corrected. Whisky values fell 10.9 per cent, while parts of the fine wine market have softened following pandemic-era highs.

Perhaps the most notable trend is behavioural. Younger investors are entering the market through fractional ownership platforms, gaining exposure to high-value assets that were once out of reach.

For property, the parallels are clear. The same focus on scarcity, narrative and long-term value is increasingly shaping buying decisions at the top end of the residential market.

Global wealth

The growth in billionaires is not just increasing demand, it is changing where that demand is directed.

In Australia, Brisbane has emerged as one of a handful of global cities experiencing rapid change in its luxury positioning. The city’s transformation is being driven by infrastructure investment and the 2032 Olympics, with top-end apartment prices rising from around US$6 million to more than US$10 million in just 12 months.

Luxury price growth has remained steady, with Brisbane rising 2.1 per cent in 2025, while the Gold Coast recorded 2.8 per cent.

At the same time, buying power is tightening. US$1 million now buys 5 per cent less in Brisbane than it did five years ago, reflecting the upward pressure on prime markets.

The trend is not confined to capital cities. Regional lifestyle markets are also capturing attention. Geelong’s waterfront has been identified as one of the world’s hottest luxury residential markets, driven by a combination of coastal amenity, infrastructure and relative value.

In these markets, pricing is no longer the sole driver. Lifestyle, accessibility and long-term growth are increasingly shaping buyer decisions, particularly among globally mobile wealth.

Alternative luxury assets

Beyond residential property, high-net-worth individuals are continuing to diversify into alternative assets that combine lifestyle and investment potential.

One of the most compelling examples is vineyard investment. Knight Frank’s Global Vineyard Index highlights the Barossa Valley as one of the best-value wine regions globally, where US$1 million can secure more than 18 hectares of land.

Despite a 10 per cent decline in land values over the past year, the broader outlook remains positive, particularly as the global wine industry shifts toward premiumisation.

This “trading up” trend is seeing consumers favour higher-quality, provenance-driven wines over mass-market products, reinforcing the long-term appeal of established regions like the Barossa and Eden Valleys.

For investors, the appeal lies in the intersection of lifestyle and capital preservation. Vineyard assets offer not only production potential, but also a narrative — something increasingly valued in a market where experience and authenticity carry weight.

MORTGAGE HOLDERS DEFYING PREDICTIONS AND MANAGING DEBT

However, there is one group spending their savings at a faster rate than the rest

Australia’s wealthy class is expanding fast, and Knight Frank says that a surge in billionaires is reshaping the nation’s luxury property market.