Based on information provided by RP Data, as of the end of the September quarter 2011, almost 5% of property owners in Australia are sitting on negative equity – ie. they owe more on their home loans than their property is worth. If property prices continue to slide this problem will become more serious – mirroring the events in the US during the GFC when people simply handed their property keys to their lenders and walked away.
RP Data’s latest National Equity Report, launched late last year, showed that negative equity has increased from 3.7% at the end of last quarter based on RP Data’s automated valuations.
Property owners who have made their purchases 10 years ago or even earlier are still sitting on very strong profits. It seems that 43% of all properties are still worth more than twice their purchase price.
Far North Queensland, Gold and Sunshine Coasts, have been affected to most by this with some instances of negative equity at 20.2%, 14% and 13.5% respectively.
Meanwhile, Western Australia’s Lower Great Southern and South West and South Eastern Western Australia are also showing high levels of negative equity according to the report.
Australian housing markets have recorded value declines recently with capital city home values down 3.3 per cent from their October 2010 peak to September 2011.
Capital cities have have shown the most resilience against equity falls over the long term, with RP Data saying they have proven less susceptible to ongoing value falls than certain non-capital city markets.