Over 300,000 Australians have no home equity

by Miklos Bolza02 Feb 2017
Researchers at Roy Morgan have revealed that 302,000 or 6.9% of Australian mortgage holders had little or no equity in their homes in the 12 months prior to October 2016.
While this figure was an improvement on the 345,000 found in the same time period in 2015, the issue still remained a serious concern especially if individuals within this group were forced to sell or in a price decline.
Mortgage holders in Western Australia and South Australia are at considerable risk, researchers found. In WA, 54,000 or 10.4% of borrowers had little or no equity in their home. This was the highest rate in Australia and was an increase of 2.1% from the same period in 2015. In SA, 27,000 or 8.0% of mortgage holders had little or no equity – an increase of 1.8% from the same period a year earlier.
Fortunately, the number of borrowers without any equity in other states and territories showed signs of decline over the stated 12 month period:
Location No. of borrowers Percentage Per cent change
Sydney 33,000 3.9% -1.1%
Melbourne 50,000 6.1% -1.6%
New South Wales 73,000 5.1% -0.9%
Victoria 65,000 6.0% -1.6%
Queensland 63,000 7.2% -2.6%
Tasmania 5,000 4.7% -0.6%
“Despite some improvement over the last twelve 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,” Norman Morris, industry communications director for Roy Morgan Research said.
The market could be spooked by any further movement by the banks especially since interest rates have been low for so long, he told Australian Broker.
“I don’t think rate rises have to be huge – just enough to make people a bit nervous.”
Having no equity in of itself does not mean mortgage holders are at risk, he said, signalling that this group would only be in danger if forced to move or if prices declined.
“It’s really a matter of when house prices go down. They can’t sail into the sunset forever. When we go down, there will be a problem. As to when that happens, that’s a question that everyone’s asking.”
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