Mining area mortgage arrears climb

From Fairfax:

More borrowers are falling behind on their home loan payments in mining towns, as resources hot-spots feel the pain of plunging commodity prices, Standard & Poor’s says.

“The fall in iron ore prices during the past 12 months has coincided with a rise in arrears in mining areas,” a report from the credit ratings agency said.

“This is not surprising, given that mining areas are highly dependent on a few key employers and the flow-on effects of a downturn in a key industry are more pronounced in such areas.”

The following chart from S&P shows that arrears rates in mining-heavy areas had risen from about 1.5 per cent to 2 per cent in the past year, as the iron ore price has tumbled.

The areas, which include the Pilbara, Kalgoorlie, Mount Isa, Hunter Valley and Broken Hill, accounted for about 1.7 per cent of the loans used in S&P’s data set of residential mortgage bonds.

Next stop Perth.

Comments

  1. The Patrician

    Weird that the two data sets appear to have been generally positively correlated until the last 6 months

    • Agreed. There’s not much iron ore coming out of Broken Hill, Hunter Valley or Mount Isa, which could explain the weaker correlation.

    • overlay interest rates too, then 6 months ago interest rate didn’t matter anymore to those out on their arses.

      • clone278MEMBER

        They’ll know about it once the white-walkers return, i.e. all those sacked ex-FIFO mining workers who sold their souls to work the mines and “invested” all their earnings in property

  2. West Perth disease is spreading. Soon to swallow Perth, then Brisbane, Melbourne and finally Sydney as it all collapses under its own weight. If only journalists did not have mortgages then they might ask Joe Hockey and Abbott and Shorten if they have a massive conflict of interest by having all their wealth tied the the Aus property market, seeing they are trying to continually juice it.

    • That is where all the small mining stocks have(had) offices. Some free space up there now.

  3. While there are quite a few ‘For Lease’ signs in West Perth you may have noticed prices have hardly moved.

    • Negative gearing means there’s no need to cut rental prices, at least until the new tax year, or unless the landlord loses their main source of income (but again not until their payout has run out)

  4. Hang on. WA mining area mortgage arrears have risen from 1.5% to 2% – hard but not catastrophic. I think S&P and you are getting ahead of the story, HnH. The improving downtrend has been broken, but the death marches have not yet begun. They will.

    Don’t Buy Now!

    • Surprised things aren’t worse already in Perth. People seem to be still hanging on without too much effort.

      • 1. Still reasonable amount of work for construction related workers, highly mobile: Wheatstone on track to expand 4000 to 7000, Roy Hill, Icthys, Curtis etc
        2. FIFO factor, spreads geographic fallout.
        3. Consultants start feeling the pinch as new project pipeline completes.

        I’d say more collapse noise at present than reality but this feeds into psyche and depresses economic spirits. Still some way to go.

      • 3d1k, \
        Yes to 1, 2, 3: a factual though understandably partisan summation.
        Unfortunately spoiled by the penultimate sentence though the last is unarguably true.

        Will the real 3d, you know, the prepper with the Chilean pad, please stand up and be heard.

  5. Exactly suckers will hang on as long as they can. The really really really interesting part is what the banks will do. Remember during the GFC, when all these Margin Loans came in the Banks allowed people to keep their homes and refinanced as they did not want all these high end homes coming on the market at once. I am guessing the banks will grant those being foreclosed a stay of execution for fear of flooding the market. This is going to be a drawn out horror movie. Every single trick will be played and everyone will hope the economy will pick up enough so those who face foreclosure can again become solvent. MB is right. It still has a few years to go but there is little doubt it has started in Perth and Darwin.

    • SoMPLSBoyMEMBER

      “Goodness!” he thought to himself as he re-read the section on which national RE office was mentioned twice and ‘related’ to both early sunset clauses being invoked. This was followed with an astonished ‘Gracious’ when he re-read the conveyancing lawyer’s sentence : β€œIs it legal? Probably yes. Is it ethical? No. It’s a cautionary tale that really you need to find out the history of that developer before you sign any contract.”
      It’s heartening to discover that ‘unethical’ can exist in harmony with ‘legal’ in Ozzie real estate contracts.

      • well said
        little redeeming features in the RE industry – i’ll reconsider my stance once re agents are bound by AFSL (i.e. never)

    • Ronin8317MEMBER

      When I bought ‘off the plan’ over 10 years ago, my contract did not have a sunset clause.

      Reading the contract is beyond a layman like myself, but the lawyer I hired reads each line of the contract out and explains to me what each clause means. I expect this is probably the case for those buyers as well. For many ‘off the plans’ purchase the developer will provide the lawyers as well, and it’s a sure bet their lawyer will tells you ‘it’s normal practice’ to have those clauses. >_<

  6. Recently I spoke with a friend living in Newcastle, he rents and his landlord was a coal mining geologist (now driving taxies). He tells me it is impossible to get even the most basic of repairs undertaken because the owner cant afford the extra costs. Hmmm landlord cant afford upkeep on a $1+M property!
    What’s going to happen? My friend says he’s leaving once the lease is up and he s looking to cost down. Raises some interesting legal questions about the obligations of landlords to provide a safe environment for tenants (apparently one of the problems is that on the front porch the railing is falling apart and the floor boards are rotting)….In Australia’s OH&S environment I wonder if some enterprising unemployed lawyers might have a field day suing these over leveraged ex-mning bbom landlords?

    • No ones had an accident yet but it’s only a matter of time. Hmm – you can’t afford repairs and probably can’t afford your mortgage. What’s the chance you stop paying the insurance ?

      • Not no money – no assets that a court can’t liquefy. Clearly landlords are not in that category.

        Moreover, it probably won’t be until after the damages are awarded and a court order to sell property executed that you will find that the landlord has negative equity (they might not have realised themselves)

  7. Now that this actually appears to be here on our doorstep. I’m actually a little worried… I mean I wanted this for ages given I’ve been priced out of buying a home, but now that’s it’s here I suddenly feel a sense of be careful what you wish for.

    A lot of people are going to be burned and some may never recover.