Mining bust drives up CBA’s mortgage arrears

By Leith van Onselen

The 29% crash in dwelling values in Perth and Darwin:

Along with the surge in rental vacancies in both markets:

rental vacancies:

And the circa 20% collapse in rents:

Has seen mortgage arrears lift in both jurisdictions, as reported by CBA’s full-year profit results.

As shown below, overall mortgage arrears lifted across CBA’s portfolio from 0.6% to 0.7%, driven by a rise in both owner-occupier’s and investor’s arrears:

However, mortgage arrears have lifted particularly steeply in Western Australia and the Northern Territory, where arrears are tracking around 1.5%:

The CBA claims that the blow-out in arrears reflects “pockets of stress” as “some households experienced difficulties with rising essential costs and limited income growth”, with Western Australia’s weakness driven by “outer-metro and regional areas” rather than the mining towns.

Arrears are likely to remain elevated in both markets given population growth cratered just as dwelling construction boomed:

This oversupply will likely lead to ongoing weakness in both dwelling prices and rents, placing particular stress on investors, whose cash flow is being cut just as the interest-only mortgage reset takes place (lifting repayments by around 35% as loans convert to principal and interest).

[email protected]

Comments

  1. Forrest GumpMEMBER

    The Chart for the Rental Price Index is simply wrong. Rents now are much lower than they were in 2009….by a long shot by at least -40% down and some…What was rented out in 2009 was $450 and now its $330.

  2. Darwin over supply is totally understated. Good luck in Darwin if you bought anything associated with property in the last 5 years. You are under water even without a cyclone! The only remotely good thing is if you bought a property with some land, however if you bought some horribly built god forseaken Darwin apartment then bad luck, stuffed, dead parrot & all, gone!

  3. Let’s not forget Queensland doing its bit for the banks!
    eg

    14 Ruff Crt, Collinsville, Qld, 4804, $175,000 on 5-Jun-18; $330,000 on 14-Mar-11
    104 Garrick Street, Collinsville, Qld, 4804, $69,000 on 1-Jun-18; $189,517 on 27-Apr-12
    7 Aberdeen Street,Collinsville, QLD 4804, $110,000 9-May-18 $270,000 3-May-12
    67 Station Street, Collinsville, QLD 4804, $87,000 on 30-Mar-18; $150,000 on 3-May-11
    11 Aberdeen Street, Collinsville, QLD 4804, $35,000 on 19-Mar-18; $150,000 on 2-Apr-12
    13 Aberdeen Street ,Collinsville, QLD 4804, $40,000 on 26-Feb-18; $150,000 on 30-Apr-12
    24 George Street, Collinsville, QLD 4804, $67,000 on 19-Feb-18; $225,000 on 3-Dec-12

    Just the tip – promise!

  4. Imagine how overstretched property speculators in Sydney and Melbourne are going to be squashed when rents fall by 30% or more
    In Sydney that means they’ll have to find $5k-$10k somewhere else to put into every PI sinking ship – even if RBA cuts by 1%

    • Absolutely, doc. There are more empty shitboxes looking for tenants than most even real old timers can recall. All that unrented stock is leveraged to the eyeballs…….What could possible go wrong, doctor?
      P. S. Inflation will tick down subtantially with major drop in rents.

  5. In the first graph the drop in the red line looks steeper than the drop in the blue line yet they are both 29%??