FNQ, Sunshine and Gold coasts dominate RP Data negative equity list

Three regional Queensland markets head RP Data’s top 10 list of locations with the highest proportions of homes with negative equity, according to the latest quarterly report.

The situation is particurlarly acute in far north Queensland, where more than one in five home owners (20.2%) had negative equity in their homes in the September 2011 quarter, up from 13.5% in the previous quarter.

This region, which includes Cairns, Palm Cove, Port Douglas, Innisfail, Weipa and Atherton, “has been noticeably weak and has felt the full brunt of the economic downturn”.

“Prior to the onset of the financial crisis this region was benefitting from surging demand due to strong population growth, and property values were subsequently rising strongly.

“As a result, the vast majority of home owners that have purchased since 2008 are likely to be in a negative equity position,” says RP Data.

Second and third on the list are the Gold Coast (14% of homes in negative equity) and the Sunshine Coast (13.5% in negative equity) while the Wide Bay-Burnett region – the coastal and hinterland areas between Caloundra and Gladstone – also makes it onto the list with, just under one in 10 homes in negative equity. 

The proportion of homes with negative equity on the Gold Coast is up from 9.9% in the previous quarter, highlighting “the ongoing weakness across the market, with no signs of a recovery in property values to date across the region”. 

Western Australia regional areas are also prominent on the list, with more than 10% of properties in negative equity in four locations. 

Two Victorian regional areas – Ovens-Murray and the Mallee – round out the top 10.

Across Australia (and in line with a decline in property values) nearly one in 20 home owners (4.9%) find themselves owning properties that are worth less than when they bought them, up from 3.7% in the previous quarter.

At the opposite end of the spectrum, the top 10 regions with the lowest levels of negative equity have less than 3.5% of all properties in a position where the current value is lower than the purchase price. 

Canberra has the lowest proportion of properties in a negative equity position, with just 1.2%, up from 1% in the June quarter, with Melbourne and Sydney also making the list of regions with the lowest instances of negative equity.

Outside of these three locations, most regions on this list are “heavily linked to the resources sector or they are agricultural areas” says RP Data.

Overall, Victorian households enjoy the strongest equity position, with 68.5% of home owners having at least 50% equity in their property, down from 71.4% last quarter.

Households in the Northern Territory (60.6%) and the Australian Capital Territory (60.5%) also enjoy relatively strong positions.

RP Data estimates equity accumulation by measuring the difference between the original purchase price of home and the current valuation for individual properties around the country.

It therefore does not take into account the size of people’s mortgages in relation to the value of their homes – the typically understood definition of negative equity.