Finance advice

Worrying number of home owners have no equity

By Hannah Blackiston
Worrying number of home owners have no equity

According to data released by Roy Morgan Research, a concerning percentage of home owners have little to no equity in their home.

These figures are due to the value of their home being equal to or less than the amount they owe, which is a real concern if the property market sees a downturn.

Currently 6.9 per cent of mortgage holders have little or no equity, which works out to 302,000 people, a decrease on the 2015 figure of 345,000 but still alarmingly high.

“Despite some improvement over the last 12 months, there are still over 300,000 home borrowers who have no real equity in their homes. This represents a considerable risk to these households and their banks, particularly if home values fall or households are hit by unemployment. With some early signs that home loan rates are rising, the problem is likely to worsen as repayments increase and home values may decline, which has the potential to lower equity levels even further,” said Norman Morris, industry communications director, Roy Morgan Research.

Western Australia and South Australia are two of the hardest-hit states: 10.4 per cent of mortgage holders in WA have little to no equity in their homes, which is the highest percentage in Australia and an increase of 2.1 percentage points on 2015 figures.

SA was the only other state to see the figures worsen over 12 months. From 2015 to 2016 there was an increase of 1.8 percentage points to 8.0 per cent, a total of 27,000 home owners.

Tasmania was the best performer with 4.7 per cent of mortgage holders (5,000), followed by NSW with 5.1 per cent (73,000), Victoria with 6.0 per cent (65,000), Melbourne with 6.1 per cent (50,000) and Queensland with 7.2 per cent (63,000).

Unsurprisingly due to the growing house prices, Sydney was the city with the lowest proportion of mortgage holders with little or no equity, 3.9 per cent (33,000), a reduction of 1.1 percentage points on the previous year.

The risk in the mortgage department is partly calculated using loan-to-value ratio (LVR). The lowest figures were found in Sydney, which had an average LVR of 28.9 per cent.

Melbourne also saw a low LVR, 32.4 per cent. Again, this can be chalked up to booming prices in these areas.

Worrying LVR figures were found in Queensland, with 44 per cent, SA and Tasmania, each with 42.3 per cent and WA, with 41.4 per cent.

All states showed that the homes where owners had more equity were on average of a higher price point than those without, or with low equity; in Sydney the median house price of a mortgage owner with no equity was $762,000, compared to a $1.1 million average for a mortgage owner with equity in their property.

“It is clear that borrowers in lower-value homes are among the most likely to be faced with the problem of low equity levels. Higher-value properties with a mortgage appear to be in a much less risky position because they are likely to have had their loan longer and may have had a far larger deposit, particularly if they traded up,” said Mr Morris.

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  ["title"]=>
  string(72) "Mortgages in a tighter lending economy and why Brisbane is a good option"
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  ["introtext"]=>
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Tune in to the latest episode of Property Showcase, the podcast with the inside track on the products and businesses that will help turbocharge your portfolio, maximise returns and make your overall investment experience seamless and stress-free!

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To hear more about these services, make sure to tune in to this episode of Property Showcase!

 Make sure you never miss an episode by subscribing to us now on iTunes!

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Son Pham is the accredited Head of Mortgages at Rethink Financing\/Rethink Investing. He has over 6 years\u2019 experience writing loans, over 12 years in the wealth management industry working for the likes of CBA, AMP and private practice and he is also a licenced financial planner (AFSL 326450). He has multiple investment properties that are cash flow positive which help pay his mortgage on his home and fund his lifestyle.<\/p>\r\n

Son is able to write all types of residential and commercial property loans.<\/p>\r\n

In this episode of Property Showcase, head of mortgages at Rethink investing Son Pham joins host Tim Neary to unpack how an investor should approach getting a mortgage in place with banks tightening down on serviceability.<\/p>\r\n

Hear from\u00a0Son\u00a0about:\u00a0<\/p>\r\n

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  • The pitfalls that he has seen people get into<\/li>\r\n
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    Whether it\u2019s building a successful property portfolio or investing in one of their Development Funds, Open Corp can help you through every stage of your investment journey. The team has 40 property specialists who collectively have been involved in over $4 billion worth of property transactions and the acquisition of more than 8000 homes and investment properties.<\/p>\r\n

    In this episode of Property Showcase, director of investment services for Open Corp Michael Beresford,\u00a0joins\u00a0editor of Real Estate, Tim Neary to share why he disagrees that the cooling market means that the best times are behind us.<\/p>\r\n

    In this episode, hear from\u00a0Michael\u00a0about:\u00a0<\/p>\r\n

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Mortgages in a tighter lending economy and why Brisbane is a good option
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Will Magee has had ambitions to enter into the Australian property market for quite some time, but it has been more than just finances holding him back.  Having been granted permanent residency just two weeks ago, Will is wasting no time and is now in the process of signing papers and finding his first investment property.

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In this episode of the Smart Property Investment Show, Will joins host Phil Tarrant to share why he is purchasing his first property in partnership with his brother, discuss the complications that can arise from such a strategy, and unpack the ongoing plan for building a joint property portfolio with his brother.

Will will also share how they approached saving for their first property, why he is taking out the mortgage in his name exclusively, and share their savings plan for the year ahead.

If you like this episode, show your support by rating us or leaving a review on iTunes (The Smart Property Investment Show) and by following Smart Property Investment on social media: FacebookTwitter and LinkedIn.

If you have any questions about what you heard today, any topics of interest you have in mind, or if you’d like to lend your voice to the show, email [email protected] for more insights!

RELATED AREAS OF INTEREST:

From property in Australia to a ski lodge in Japan
Mortgage Trusts, an alternative first step for property investors
Should a real estate title be in one person’s name only?

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A property investment plan years in the making
object(stdClass)#1203 (52) {
  ["id"]=>
  string(5) "18287"
  ["title"]=>
  string(75) "Regional Victoria showing up Melbourne in price performance, new data finds"
  ["alias"]=>
  string(74) "regional-victoria-showing-up-melbourne-in-price-performance-new-data-finds"
  ["introtext"]=>
  string(139) "

Median house prices in regional Victoria outperformed that of Melbourne in the June quarter, the latest REIV figures reveal. 

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Median house prices in the regions rose 4.0 per cent to $419,500 but in Melbourne they dipped by 0.6 of a percentage point to $840,000.

The result in Melbourne was due to a 0.8 of a percentage point fall in prices achieved at auction; this was despite a lift of 2.3 per cent in private sales.

Inner Melbourne suffered due to auction prices, where median prices fell by 4.9 per cent to $1,459,000 but it was middle Melbourne that was hardest hit, with a 5.4 per cent drop to $974,500.

Outer Melbourne had a good quarter with the median rising by 0.5 of a percentage point to $681,000.

Apartment prices in regional Victoria grew by 3.7 per cent to $304,500 while the metro media was up by 0.5 of a percentage point to $604,000.

REIV President Richard Simpson said that despite fewer sales, many sectors of the market were performing well.

“2017 was a bumper year and while the trendline has flattened, despite the fall in median house prices in the June quarter, median prices are still up this calendar year for both houses and units, in Melbourne and in the regions,” Mr Simpson said. 

In particular there was been strong growth in regional centres which is probably due to the first-home buyers’ concessions said Mr Simpsons.

“The first-home buyers’ concession has been a boon for regional areas. A new entrant to the property market buying a house at the regional median will pay no stamp duty, while a first home buyer of an apartment in Melbourne at the median price would pay stamp duty of nearly $25,000,” he said.

Mr Simpson said that more prospective buyers are looking towards regional Victoria which is also having an effect in Melbourne.

“Melbourne’s outer perimeter continues to grow. Small increases in the June quarter mean that the median prices for both houses and units have risen over 10.5 per cent from a year ago.

Mr Simpson said moving forward that vendors need more realistic expectations as the highs of 2017 are now over.

“Negative chatter about the future of the sector coupled with stronger lending controls by financial institutions has created some uncertainty and vendors need to be realistic with their price expectations,” Mr Simpson said.

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Regional Victoria showing up Melbourne in price performance, new data finds

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