The spectre of negative equity is creeping across the Australian housing market. According to RP Data’s first Equity Report (below) Queensland leads the way with 6.3 per cent of homes in negative equity, while the Australian average sits at 3.7 per cent.
On the good side 41.3 per cent of homes in Queensland are more than double what was paid for them. However, given the equity to loan ratio of our banks these numbers are quite worrying. A sustained uptick in unemployment is definitely something to be very concerned about at this point.
It must be noted that the definition of negative equity defined in the report is not correct because it is a measure of outstanding debt to the current value of the property. I am sure that RPData don’t have access to the outstanding debt records for each loan, so in fact this an estimation of a property owner’s financial position based on sales histories.
From the report:
Across the country just 3.7 percent of home owners are in a position where the original purchase price of their home is lower than the current value of their home, however there are regions around Australian where weak housing markets have created higher rates of negative equity. Focusing on Statistical Divisions (SD) around the country, the analysis shows the regions which typically have the greatest proportion of properties with a negative level of equity are located in Queensland and Western Australia.
This should come as no real surprise considering both markets have been particularly weakperformers during recent times, most notably within coastal markets which had previously been supported by tourism and the ‘sea change’ phenomenon.Five of the ten regions with the greatest proportion of negative equity properties are coastal.
The Far North region of Queensland which includes areas such as: Cairns, Palm Cove, Port Douglas, Innisfail,Weipa and Atherton has recorded the greatest proportion of properties in a negative equity position at 13.5 percent of all homes. The housing market within the north of Queensland has been noticeably weak and has felt the full brunt of the economic downturn. House values in the region have increased by just 3.2 percent annually over the past six years and unit values have grown by 2.8 percent annually. Although values have risen over the period, if we focus on just the last three years, house values are currently -7.3 percent lower than they were three years ago and unit values are -20.4 percent lower. The vast majority of home owners that have purchased since 2008 are likely to be in a negative equity position
I am not surprised at all.
The full report is below, however if I didn’t know any better I would swear it wasn’t a final draft.
This data is four months old. My concerns about Australia’s financial stability have just gone off the charts.