SA and WA lead the way - Negative Equity

So happy days when you can access equity... but...…..

When loans exceed the value of property... ouch.... you can not sell and you continue having to service debt.


Every state except Queensland is now experiencing more situations of negative equity than last year, with WA and SA leading the charge.



Source: Roy Morgan

 

*Value of home is less or equal to amount owing


No exactly saying all of those are *negative* equity. I'm sure a lot of those loans are just because they went interest only.
Would be good to see the split being those that have lost value in their house compared to those just not paying their loans.

 

Also "less or equal" is a really broad range of real experiences. Someone who has just bought in a flat market with a small deposit and is making payments has "equal to" by definition if the bank val was at purchase price. Would like that unpacked with more detail. The increase from 8 to 8.9% is concerning for those people of course I'm not ignoring that. As always, if you buy well enough you are insulated from most of this.

Also, to reverse the headline "91% of homeowners have loads of equity" - but I guess that doesn't sell papers.

 

SA ?! Wasn't expecting that....

 

Yeah I find it hard to believe to be honest.

Maybe those in SA just don't understand what their home is worth?

How does this work? They just guesstimate the value of their home and compare it to the mortgage?

How can SA have such a large jump in negative equity owners (a larger jump than any other state) when prices in the capital cities did this:

 

Wow, those percentages are huge. Hard to believe, considering that most buy with an LVR of 90% or less, meaning that a significant fall in value is required to wipe out or go into negative equity, and these stats capture all mortgagor holders, even those who bought many years ago at much lower prices. That represents a lot of pain for recent buyers. Scary thought what would happen to the market if interest rates were to rise significantly.

Yes but most people take out an IO loan at 80% LVR... meaning that their property values have to fall ~20% to be equal or less than the loan amount. Which is a significant fall.

 

Sounds very rubbery lol

 

Ah true. Maff fail.

 

And if I correctly understand tax treatment of claimed depreciation, you could in theory sell at a loss and get a CGT bill?

 

It might be Whyalla/regional SA doing the damage ....

 

Really? When was the last time SA had a boom cycle? I don't remember??

 

Interest rises wont make it pretty?
But interest only loans now reverting to P&I will have massive impact, already happening.

 

As per graphs, Adelaide has been on the steady incline ever since 2014 whereas SA Regional has been fairly stagnant (like most states regionals). So, i suspect if the article is true (and i suspect its not, as per Josephs post - it was done purely by surveying people and asking them what they owe lol) - then its likely to be the regionals holding them down.

 

I guess Canberra is not a city then lol

 

Probably need to look at the big picture, and the reason why SA and WA lead the way.
House prices have not kept up with inflation, in other words going backward.

Who knows moving forward, unless the credit squeeze eases I don't expect any rises.


Extract M Yardney

Adelaide housing market
The Adelaide property market has been flat over the last decade, with a rise in property values of 10% over the last 10 years — in other words, house prices haven’t kept up with inflation.

Over the last 12 months, house values were 1.4% higher and apartments grew in value by 1.3%.

On the rental side, vacancy rates have been steadily falling and house rentals have risen by 2.6% over the last year.



I know some interstate investors are looking at Adelaide as a future hotspot’, but I would caution there are a few long-term growth drivers in Adelaide.

Currently, Adelaide has been experiencing difficult economic conditions with rising unemployment.

While Adelaide might be a lovely city to live in, and is still very affordable, I suggest investors look elsewhere. For example, there are better long-term growth drivers in the Brisbane property market.

Perth housing market
The Perth property market has been on a downward trajectory since peaking in June 2014.

Although values are still falling, many of the other metrics are now suggesting the Perth property market is bottoming out, though it has not found a floor yet.

But like all other capital cities, the market is fragmented, with performance varying across various subregions.

Currently, rents are slowly rising as vacancy rates are consistently falling.

Although the Perth economy is in recovery and population growth is starting to pick up, the dwelling surplus in Perth looks set to remain in place for some time.



While the Perth market may level out in the next year, it’s much too early for a countercyclical investment in the west. I can’t see prices rising significantly for a number of years, due to the reluctant demand from investors and the significant oversupply of new apartments, there is little to no prospect of capital growth or rental growth in the Perth apartment market for many years.

Like the other states, Western Australia’s population trend has a significant impact on the overall performance of its property market.

To get people back into the state more jobs will need to be created.

 

Real price declines (i.e. stagnant nominal prices + ongoing inflation) don't put you in negative equity.

 

I guess it depends on what you paid and what its worth today.

dont need charts for this

 

It's not even what you paid, it's the value of your outstanding loans vs what it's worth today.

e.g. if I paid $400,000 for a home and took an 85% LVR loan against it, the price of the property would have to fall to $340,000 (or lower) before I am in the situation captured by these statistics.. and I'm supposed to believe that 12% of SA home owners are in a situation like this when the median price looks like the charts posted above?

Maybe it's true, it just seems highly unlikely. I emailed the communications director, will post his responses if any are forthcoming.

 

You're forgetting that the results came from a simple survey though lol so unreliable at best.

And as already proven, weighed down by country towns (probably whyalla)

 

Thats fine you dont need to believe stats/data,

Most will be defensive as they hold property in the State or have vested interest. No skin off my nose. Could not care less

But ask the question, who can or is accessing equity from their properties today????

Locations/addresses????