“There are a number of developments throughout the area which were highly geared and commenced or completed construction too late to benefit from the last boom."
Nelson Bay vendors not all that delinquent: Estate agents
Estate agents in Nelson Bay, the suburb in Australia with the highest number of mortgage arrears, say the high mortgage arrears rate only applies to lifestyle properties, and they blame a series of poorly timed developments in the area for the number of lapsed mortgages.
A recent report by Fitch Ratings found the NSW Hunter region town has a delinquency rate of 7.8% for mortgages more than 30 days in arrears – five times the national average of 1.6%.
The Nelson Bay figure is unchanged from six months ago, and it has been consistently hard hit since Fitch’s first report in 2007.
Local agent Daniel O'Meara of O'Meara Property says although the rate is high, there are few cases where residents are losing their homes.
“The vast majority of owners of these properties are not owner-occupiers and rarely live locally. As these are not the family home, the mortgage will often be let slip once money becomes tight.
O’Meara says part of the reason so many lapsed on their mortgages was the high number of poorly performing developments in the area.
“There are a number of developments throughout the area which were highly geared and commenced or completed construction too late to benefit from the last boom, and the loan value is so high that the borrowers have experienced higher-than-average days on market to achieve a suitable sale,” O'Meara says.
Raine and Horne agent Chris Hasson says there were a series of poorly timed decisions by developers that have since gone into receivership.
“There were a whole group of the units which went into receivership based on their developers going broke which were then bought by a super fund, so there’s a whole heap being sold,” says Hasson.
“If you took out those complexes we’d be well below the average.
“The people who developed those bought the land around the peak time in 2002 to 2003. They paid too much for the land and then bought all the units and tried to sell at a time when we’ve had GFC and other slow-downs in the market.”
Hasson says his agency has handled just two or three mortgagee repossession sales in the last six months.
“Our big feeder is retirees and families, those properties are in high demand they can sell in two or three weeks. Out stock is down 35% and demand has gone up 5% in the last six months.”
O’Meary says the 2315 postcode contains a much higher than average proportion of investment and holiday or lifestyle properties, which are not owner-occupied.
“Lifestyle or holiday properties tend to have a low return once all fees and costs are deducted, often leaving the loan unserviceable if the owner has lost employment or experienced a business downturn.”
He says investors need to do their homework before buying into the lifestyle market.
“There is always a risk in highly gearing the purchase of investment and lifestyle properties, so investors should always have a back-up plan”
“Market lows always eventually follow market highs, and we all need to account for both ends of the scale.”
The Port Stephens municipality has a population of 64,807 people with 30,516 private dwellings, according to ABS 2011 census data. Some 18.7% of dwellings are unoccupied, nearly double the state figure of 9.7%.
The median weekly household income is $999, compared with the state median of $1,237.
The median monthly mortgage repayment is $1,725, compared with the state median of $1,993.
The Fitch report blamed the high delinquency rate on “stagnation in the local housing market, which led to an accumulation of arrears in the 90+ day bucket”.
“The stagnation in the local housing market has increased the time required for foreclosed properties to sell, leading to an accumulation of arrears in the 90+ day bucket (4.57% as of March 2012).
“Furthermore, properties that are in arrears tend to be high-value properties, where the mortgage balance is on average almost three times the average loan balance in Nelson Bay,” says Fitch.
The median house price in Nelson bay is $417,500 with prices down 1.8% over the last five years, according to RP Data. For units, the median price is $310,000, down 26.4% over the last five years.