Nelson Bay mortgage arrears due to starry-eyed holidaying buyers: local broker

A mortgage broker in Nelson Bay, the most mortgage delinquent suburb in Australia, agrees the blame on its unenviable record rests with impulsive holidaymakers.

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%.

Local broker Ben Eick of Hunter Home Loans Solutions in Nelson Bay says the local residents aren’t to blame for the rate, echoing comments by local agents to Property Observer last week.

 “My understanding is that the properties are bought basically from people coming up here on holiday, liking the area, seeing an apartment or unit that looks fantastic,” he told Australian Broker Online.

 He says holidaymakers bought a slew of properties in 2005 and 2006 gambling on prices going up.

 “[They thought] these places would keep appreciating … and of course what they’ve done since then is depreciate. And that’s where they’ve come unstuck.”

 Eick says changes in the rental market have made it harder for investors to rent the property out for most of the year.

 “The rental market up here isn’t especially strong, as opposed to other areas that are driven by the mining industry further up the valley.”

 “It can have a direct effect on whether they can pay their mortgage,” he says.

Local agents say the problem is due to people out of town letting their mortgage slip. They say the rate has also been driven up by a series of unit developments which have gone into receivership.

“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,” agent Daniel O'Meara says.

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.