Residential property markets in outback mining towns are struggling in the wake of the national mining and construction downturn. While a crisis for many, low prices present an opportunity for regional locals to access affordable property.
The Australian yesterday published a story on the plight of residential property in the mining towns in the wake of a significant contraction in the mining and construction industries. The story reported that, according to a report by credit agency Moody Investor Services, Western Australia’s outback residential property market has been hardest hit by the downturn, with up to 43 percent of mortgages falling into negative equity.
Negative equity means that the mortgage on a property exceeds the market value of a property and the potential disaster of that situation was a major factor in the credit crisis of the GFC. It is the space in between the rock of not being able to afford to keep a home and the hard place and not being able to afford to sell it.
While highlighting that the problem also affects other post-mining boom regions across Australia, for example Fitzroy and Mackay in Queensland, the figures highlight that the plight of the residential home owner was often missed from the narrative of soaring markets, particularly in the capitals of Sydney and Melbourne.
The equity crisis in these outback towns sits in stark contrast to the national average, reported in that same article to show that Australian property overall had appreciated by an average of 43 percent between December 2009 and December 2016.
In the wake of this report, we discussed outback Western Australian residential property with Alexander Waters, Director of Realmark, an agency operating in Karratha for a silver lining amidst these sobering figures. Waters provided real insight into the what the market is like on the other side of the coin. “Approximately 25 – 30% of the sales in the marketplace are mortgagees in possession,” said Waters. “However we are starting to see an increase in the volume of sales and also even a slight price increase in some suburbs.”
So while the equity drop is concerning, even devastating for some, the down market cycle also provides an opportunity for home ownership and access to The Great Australian Dream for a new demographic.
“Low pricing is allowing more and more locally based people to buy and live in their own homes, said Waters, who estimates that 90% of the buying cohort in his region are owner occupiers.
A silver lining delivered from the coal face of outback residential real estate to an otherwise grim outlook. Silver-ish, anyway.
