Aerial pictures over the Macarthur area, Picton, Camden and Campbelltown areas.
Aerial pictures over the Macarthur area, Picton, Camden and Campbelltown areas.

Suburbs struggling with mortgage stress

The number of Australian households under mortgage stress continues to rise and is now estimated to make up about a third of owner occupiers with home loans.

There are now more than 1,008,000 households estimated to be in mortgage stress across Australia, according to Digital Finance Analytics. This equates to 30.7 per cent of owner-occupied borrowing households.

Further analysis showed losses were likely to be higher among more affluent households and this could potentially impact residential developments in traditionally wealthy areas.

The Australian Financial Review found high levels of mortgage stress could pose a settlement risk for housing developments in higher-income suburbs like Sydney's Hornsby, St Leonards and Bondi, Melbourne's Port Melbourne, Brisbane's Indooroopilly and Milton and Gold Coast's Mermaid Beach.

"These high-crane, high-development areas are right in the crosshairs of the current property transition we're in," DFA director Martin North told the AFR.

DFA also identified the postcodes that have the largest amount of households in mortgage stress, which don't have the cash to cover their ongoing costs but may still have access to other assets, they were:

1. Sydney suburbs of Chipping Norton and Liverpool, NSW 2170 - 7732 households in stress and 116 risking default

2. Tapping and surrounding areas, WA 6065 - 7409 in stress and 298 risking default

3. Sydney suburb of Campbelltown, NSW 2560 - 6781 households in stress and 110 risking default

4. Toowoomba and surrounding areas, Qld 4350 - 6437 households in stress and 256 risking default

5. Melbourne suburbs of Berwick and Harkaway, Vic 3806 - 5267 households in stress and 143 risking default

Even more worrying is the estimated households in severe stress, who are unable to meet repayments from their current income. DFA estimates more than 61,000 households risk 30-day default in the next 12 months.

Realestate.com.au chief economist Nerida Conisbee told news.com.au it wasn't surprising that most of the areas that had the most mortgage stress were those in the mid-price range.

Aerial photo of Liverpool’s riverside lands.
Aerial photo of Liverpool’s riverside lands.

"If you look at the areas that are doing quite well (in terms of price growth) it's the suburbs that are very expensive, priced about $3-4 million-plus and those that are very cheap, about $850,000," she said.

"The areas that aren't doing too well are in that mid-price range and it seems people on pretty good incomes, particularly those on dual incomes, have taken on high levels of debt to afford homes."

Ms Conisbee said mortgage stress was increasing as people needed to borrow more to buy property because of the high prices but had not seen their incomes rise at the same rate. However, those in the higher earning brackets were not doing it as tough.

"Those in highly paid jobs or doing business are doing well, they are getting paid bonuses and there are higher levels of business confidence," she said.

"It does seem to be the middle-income earners that are struggling, a lot of those mid-priced suburbs can be quite expensive, they can be key million-dollar suburbs.

"A couple on a good income may not really be seeing the positive conditions that someone on a higher income is achieving in terms of bonuses and wages."

While wages are going up now, Ms Conisbee said any gains could be lost if banks continue to increase interest rates, which many have already done even though the official rate has not gone up.

Hourly pay rates across Australia increased 2.3 per cent over the past 12 months to the September quarter - the highest annual growth rate in three years - according to figures released on Wednesday by the Australian Bureau of Statistics.

The rise in wages is staying ahead of the consumer price index (CPI), which rose just 1.9 per cent over the same time period but not everyone benefits equally.

Earlier this year, many experts expressed concerns about low wage growth in Australia and how it was impacting lower income earners.

Corporate adviser Conrad Liveris analysed salary and total renumeration for the average ASX100 CEO and found they had increased by 9.6 per cent between 2015 and 2017.

If you take into account bonuses and other incentives, total remuneration rose from $3.43 million a year to $4.7 million - that's a staggering 37 per cent increase - compared to 5.8 per cent for minimum wage workers.

Ms Conisbee said those looking to buy should be careful to stay within their budget.

"Be prepared to hold on to the property for a longer time than you may otherwise have done," she said. "Do not panic when things go bad and be sensible in terms of what you borrow in order to buy."


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