WA a bag of mixed equity blessings for property owners

Pre-GFC, Western Australian home owners and property investors were rubbing their hands with glee at the rate of capital gain they had enjoyed on the back of a phenomenal housing boom.

Fast forward a few years later and the story couldn’t be more different, as one fifth of all homes in the west’s beleaguered real estate market are now worth less than what they were originally purchased for.

According to a report in WA Today, the state has the second highest number of properties with negative equity in Australia at 4.9 per cent, and of the 10 regions that recorded the highest rate of negative equity in the country, five are located in WA. 

RP Data’s annual Equity Report says the national average of homes with negative equity stands at 3.7 per cent, however the property recession in the west has caused prices (and therefore equity) to plummet in some areas.

In the south east across the Kalgoorlie-Boulder, Esperance, and Ravensthorpe local government areas, 11.2 per cent of homes are held in negative equity, representing the highest percentage in the state.

Other areas experiencing equity woes are the South West (9.8 per cent), Lower Great Southern (9.8 per cent), Upper Great Southern (8 per cent) and the Kimberley (7.2 per cent).

At the other end of the scale, the majority of homes (58 per cent) in the region covering the Far North, the Pilbara and the Batavia Coast had at least doubled in value since their last purchase, making it the second best performing region in the country.

With the June median house price in Perth’s sitting at $535,000 according to Australian Property Monitors (5.8 per cent down on last year), RP Data says about 30 per cent of home owners in the state have less than 25 per cent equity in their property.

Alarmingly, statistics from the WA Supreme Court indicate that more than three homes are being repossessed every day, with a total of 1242 home owners having their properties sold out from under them during the last financial year – an increase of 28 per cent on the previous year.

However the news coming out of the RP Data report was not entirely gloomy, with national research director Tim Lawless stating that Australia’s residential housing market is now worth about $4.56 trillion, which is almost four times the value of the Australian equities market ($1.3 trillion according to the Australian Stock Exchange).

WA’s housing market showed some positive signs of recovery in August, with official Landgate figures revealing a 20 per cent increase in sales compared to July. During this time, close to 5900 properties settled in what was the largest increase in activity in six years, as the number of sales increased by 23.9 per cent from the previous month and by 4.1 per cent 12 months earlier.

On average, WA home owners have 80.7 per cent equity, or $191,859, with properties typically held for 5.9 years, compared to Victoria’s average home equity of 110.4 per cent and Tasmania at 85.6 per cent, with the lowest average equity recorded in Queensland and South Australia at 54.9 per cent and 56.1 per cent respectively.


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Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au

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