RBA charts the mining property bust

By Leith van Onselen

The Reserve Bank of Australia’s (RBA) bi-annual Financial Stability Review (FSR), released on Friday afternoon, contained some useful commentary and data on the property bust taking place across Australia’s mining regions:

Housing loan performance in Western Australia and Queensland in particular deteriorated further over the first half of 2016. Applications for property possession in Western Australia have edged higher over the past two years, although nationally they continue to decline as a share of the dwelling stock…

Non-performing mortgage loans have… been most pronounced in mining areas where housing market conditions have deteriorated sharply, though only a small share of banks’ mortgage lending is to these areas…

In liaison, the banks attributed this deterioration largely to declining incomes in the mining states rather than to unemployment. For investors in the mining regions, elevated vacancy rates and sharply falling rents are reducing earnings. Housing price falls in mining regions have been substantial, and banks reported in liaison that in some towns it is difficult to sell properties, even with large price discounts (Graph 2.4).

ScreenHunter_15502 Oct. 16 18.21

For borrowers having difficulty servicing their loan, this makes it challenging to resolve their situation through the sale of their property. However, mining companies own a large share of the properties in the most affected areas, reducing the number of households affected by these steep housing price falls. The rate of personal administrations has also increased over the past six months, particularly in Queensland and Western Australia, though nationally it remains close to 15-year lows…

The slowing in mining investment and the fall in commodity prices are [also] leading tenants to vacate offices in Perth and Brisbane, depressing rents in these cities.

ScreenHunter_15503 Oct. 16 18.32

As shown above, dwelling prices have more than halved across the Pilbara, the Bowen Basin, and the Central Highlands, with smaller crashes recorded elsewhere.

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