Gold Coast replaces Sydney south-west fringe as most mortgage delinquent region in Australia: Fitch Ratings

The Gold Coast has replaced the outer south-west Sydney regions of Fairfield and Liverpool as having the highest proportion of home owners more than a month behind on their mortgage repayments.

The Gold Coast east market (including Surfers Paradise and Broadbeach) ranks as the worst-performing region, with a delinquency rate of 2.44%. The Gold Coast west (suburbs including Nerang and Carrara) ranked second, with a delinquency rate of 2.08%, according to the latest Fitch Ratings Australian Mortgage Delinquency report for the six months to September 2012.

The two markets ranked fifth and sixth in the March 2012 Fitch report have improved in line with the national trend, but not at the same pace as other regions.

At its current delinquency rate, the Gold Coast east region would have ranked as the eighth worst performing region in Australia six months ago (March 2012 report).

But demonstrating that tourism-dependent regions have not benefited to the same degree as other parts of the country from interest rate reductions and improved affordability, the Sunshine Coast ranked fourth most delinquent region with a 30 days-plus arrears rate of 1.89%. The NSW central coast market ranked sixth, with a delinquency rate of 1.81%.

All are well above the national delinquency rate, which improved from 1.6% at the end of March 2012 to 1.4% at the end of September, to be currently significantly below the five-year average of 1.56%.

“Tourist areas are less affected by monetary policy and more by the high Australian dollar, housing prices, occupancy rates and rental yields,” says Fitch.

“This is evident in popular tourist destinations being among the worst-performing postcodes. “

On a postcode basis, the well-known tourist destination of Nelson Bay in the NSW Hunter region remains the worst-performing postcode by value of mortgages in arrears, with a 30+ day delinquency rate of 6.6%.

In the previous March survey, Fairfield and Liverpool ranked as the worst-performing region in Australia, but in line with an improving outlook for the western Sydney market and parts of it being considered investment hotspots – granny flat conversions are growing increasingly prevalent – its delinquency rate improved from 2.82% to 1.82% and its ranking has fallen from first to fifth most delinquent market.

Similarly, the delinquency rate improved noticeably in the outer south-west Sydney region from 2.78% to 1.99% between March and September.

Another region on the western outskirts of Sydney, Blacktown, which was among the 10 worst-performing regions by value until September 2011, “continues to perform remarkably”, says Fitch, with a delinquency rate of 1.55% at the end of September 2012.

Fitch notes that most of the 10 worst-performing regions were in Queensland, not NSW, as was the case in March 2012.

“House price stagnation in Queensland particularly affected Gold Coast east ? which has been among the worst performing regions since September 2008 ? and the Sunshine Coast. Other regions in Queensland, which have been historically characterised by serviceability constraints, remained among the worst performing regions despite their remarkable improvement following cash-rate cuts.

“For example, delinquencies in Ipswich and Logan City, which started to increase at the beginning of 2011, have improved significantly (100bp and 91bp, respectively) in the six months end-September 2012,” says Fitch.

Melbourne dominates the best-performing regions, with five of the top six locations led by northern middle Melbourne (suburbs like North Melbourne, Kensington, Ascot Vale) with an arrears rate of just 0.55% compared with a rate of 0.7% six months ago.

The affluent lower northern Sydney market (including million dollar suburbs like Cremorne, Kirribilli and Neutral Bay) ranks second with a 30 days plus arrears rate of 0.56%, up from 0.63%. 

Commenting on the national improvement in the delinquency rate, Nomura banking analyst Victor German says the sharp but consistent improvements seen in delinquency rates coincide with the 50-basis-point and 25-basis-point interest rate cuts announced by the RBA in May and June 2012, respectively.

“With further 25-basis-point interest rate cuts put through in Oct and Dec 2012, we will be looking for signs of further improvement in delinquency rates during the upcoming reporting season,” German says.

On a state-by-state basis, Queensland has the highest arrears rate (1.41%), followed by NSW (1.25%), WA and Tasmania (1.2%) and South Australia (1.19%). The remaining states are all below 1%.