Are Budgewoi's mortgage delinquencies still high?

The New South Wales central coast suburb of Budgewoi has consistently been one of Australia's worst performing suburbs for value of mortgage delinquencies, according to Fitch Ratings.

In September last year, Kingston took over Budgewoi's title as the suburb with the highest value of mortgage delinquencies. Fitch Ratings noted at the time that Budgewoi had been one of its worst performing suburbs in the past five years.

The reasons behind the high rates of mortgage delinquency are unclear. Budgewoi, and the accompanying Blue Haven, Buff Point and Halekulani have a reputation as being popular with retirees.

The median age of the region is, at 43.9, higher than the Australian median of 37.3, according to the Australian Bureau of Statistics (ABS). As of 2012, 35.9% of the region's population were aged 55 and over, compared with the 21% in the same age bracket in an inner-city environment like Melbourne's Northcote. The listing of 117b/2 Macleay Drive in Budgewoi, currently on the market, describes "over 55's living", urging buyers to "retire in style".

While the ABS doesn't record the rate of government pensions and allowances, the average wage and salary income per year in 2011, which was a high period for mortgage delinquencies, was $57,995, while the average monthly mortgage payment was $2,257.

The most common definition of "mortgage stress" is spending more than 30% of your pre-tax income on loan repayments. Taking the ABS figures as a loose guide, the average Budgewoi wage earner, assuming they have a mortgage, spends roughly 47% of their income on their home loan.

Unemployment in the Budgewoi area was recorded at 7.7% in 2011. In 2013 the ABS, Labour Force, had the unemployment rate for the Wyong LGA consistently higher than the unemployment rates for the Gosford LGA and New South Wales. The unemployment rate for the Wyong LGA in September 2013 was 7.6%, considerably higher compared with the Gosford LGA (4.9%) and state (5.6%).

According to CoreLogic RP Data, Budgewoi's median house price in December 2014 was $482,600. The median unit price in December was $405,000 – but given most of the year saw median unit prices between $215,000 and $290,000, this is likely to be a one-off fluctuation. There have been no obvious price dives, nor jumps, in the past three years, with prices modestly trending upwards with some fluctuation.

However, when Property Observer looked through properties currently on the market in the area, more than usual had a feature in common: they had been sold less than two years ago.

There is no suggestion these are forced sales, but typical vendors must face the unhelpful headwinds associated from those that are.

52 Sunrise Avenue in Budgewoi, pictured below, is on the market with an auction price guide of $430,000 plus. The owners have held it for less than six months, having paid $385,000 in August 2014. They purchased the property from someone who paid the same amount in October 2013.

52 Sunrise Avenue, Budgewoi

1/66 Tenth Avenue is currently listed at $245,000 (pictured below).

1-66 Tenth Avenue, Budgewoi

But the vendors only purchased the home in May 2014, paying $215,000. The property has been a loss-maker for owners in the past, selling for $190,000 in 2004 and then $165,000 in 2009. While the listing calls for investors, there is no known rental history at the property.

The vendors of 31 Diamond Head Drive (pictured below) are trying to sell it for $589,000, after purchasing it in February last year.

31 Diamond Head Drive, Budgewoi

They paid $353,000 for the property in February 2014.

Andrew Sorensen is principal of Raine & Horne Charmhaven, which has been operating in the region since 2000. According to Sorensen, who is also marketing 31 Diamond Head Drive and 52 Sunrise Avenue, the area's mortgage delinquency issues peaked a few years ago, but have steadily been improving since then. There are currently no properties listed on realestate.com.au in the 2262 postcode which are advertised as mortgagee sales.

In 2013, there were two marked as mortgagee sales: 5 Regent Street, Buff Point (pictured below) and 26 Timbara Crescent, Blue Haven.

5 Regent Street, Buffs Point.

5 Regent Street sold for $325,000 in October, according to CoreLogic RP Data. The vendors paid $460,000 in 2004.

26 Timbara Crescent sold for higher than its purchase price, with buyers paying $262,000 in 2013, while the vendors paid $135,000 in 2005.

Sorensen noted that the amount of mortgagee in possession sales coming to the market "now is almost zero", compared with two a week coming up in the suburb a few years ago. He attributes the area's improving market to buyers priced out of Sydney's market, who are keen on the lifestyle that the central coast offers.

In the six months between March and September 2014, delinquencies in Budgewoi had improved, from 3.7% to 2.7%. Will the improvement continue?

Note: This article has been amended. It initially incorrectly stated that 31 Diamond Head Drive had also traded in November 2014.