While mortgage arrears in Australia are still relatively low in compared to many countries around the world, delinquencies here are nevertheless on the rise.
An although there are numerous factors at play, some experts are pointing the finger at the property investment surge in Queensland and Western Australian mining towns by overseas punters over last decade as partly to blame.
A report published in The Australian reveals that the Western Australia and Queensland property markets were running hot between 2000 and 2007 and the Reserve Bank suggests that this is one of the driving forces behind a recent pick-up in mortgage arrears.
In WA and Queensland, 90 day plus repayment delinquencies recently increased to about 0.7 per cent and 0.8 per cent respectively, compared to 2006 figures for WA of 0.1 per cent and Queensland of about 0.2 per cent.
Across the country, the Fitch Dinkum index which tracks delinquencies of more than 30 days, reported mortgage arrears reached a record high of 1.79 per cent in the first quarter for 2011, improving slightly in the second quarter to 1.69 per cent.
Last decade’s property boom saw overseas investors start snapping up local real estate in their droves and this, coupled with the mining boom that many local investors profited from, saw a sharp rise in the value of investor loan approvals, particularly in resource rich WA and Queensland.
RBA data shows that between 2000 and 2007, investment loan approval values rose around five-fold in these two states, compared with a three-fold increase for owner occupier loans.
However over the last few years, with housing values softening across the country and investor appetite has slowed considerably, property values have fallen in these mining towns.
Why I suggest you avoid mining town.
If you’ve been following my blogs you’ll know that I have always suggested you should avoid investing in mining towns. I know at times they exhibit great capital growth and good retals, but I find tese markets too volatile.
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