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Canberra southside suburbs top mortgage stress list

By Amy Birchall - 27 September 2016 31

mortgage default risk canberra

Homeowners in Kambah, Tuggeranong, Greenway, Oxley and Wanniassa are at the highest risk of mortgage default in Australia.

That’s according to 2015 research by consultancy firm Digital Finance Analytics, which used housing finance data, employment data, loan default data and arrears information to calculate the top 100 Australian postcodes where people could face financial collapse when interest rates rise.

Canberra postcodes 2902 (Kambah), 2900 (Tuggeranong and Greenway) and 2903 (Oxley and Wanniassa) topped the list, ahead of all Tasmanian suburbs, Queensland’s mining belt and the outer suburbs of Melbourne.

The Australian Financial Review commented that like Southern Tasmania, Darwin and Southern Gippsland, Canberra’s outer suburbs have “been hit hard by a mix of industrial closure, high unemployment and low wages growth, which leaves residents vulnerable to financial collapse.”

Homeowners under 35 were found to be most at risk of default.

Digital Finance Analytics principal Martin North told the Australian Financial Review that young homebuyers have been lured into the market by record low interest rates and rising property values.

“My view is these are households that are maxed-up because of the debt they’ve got and with current low interest rates they are just getting by,” Martin said.

“But if interest rates go up this is where you’ll see the first impact. If interest rates are two percent higher, it would create significant pain for households.”

The median income in Tuggeranong is $57,993, compared to between $66,000 and $78,000 in Canberra’s richest suburbs like Forrest and Deakin. According to Roy Morgan research, the tendency for a borrower to default was 83.2 percent for households earning under $60,000 per year.

However, Mr North stressed that there was more to calculating mortgage default risk than annual earnings, as buyers with lower incomes usually took out smaller loans and had a more conservative loan-to-valuation ratio.

Instead, the postcodes at the highest risk of default were those where workers would have the most trouble finding employment if they lost their job.

When the research findings were released last year, ACT unemployment was at five percent and a public sector hiring freeze had just ended. The current ACT unemployment rate is 3.6 percent – the lowest in the country.

With lower unemployment and the hiring freeze over, it would be reasonable to assume that Canberra’s southside homeowners are under less mortgage pressure now compared to 12 months ago.

However, many are still financially vulnerable – a recent Roy Morgan analysis found that 17.4 percent of Australians with a mortgage on the home they are living in are at risk of default.

Image via Australian Financial Review.

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31 Responses to
Canberra southside suburbs top mortgage stress list
madelini 9:42 am 28 Sep 16

Acton said :

1989. Home loan interest rates rise to 17%. That’s mortgage stress.

I don’t think there is any suggestion that there is more mortgage stress around than there has been in history. If you are under mortgage stress, you are under mortgage stress; it’s not – and should not be – a competition. The study was not about comparing to conditions 30 years ago, nor are they saying that it was easier for previous generations.

It’s great that you survived the high interest rates, inflation and lower wages of the 80s, but it won’t make any of the residents in the abovementioned Tuggeranong suburbs feel better if they’re close to default.

rommeldog56 8:58 am 28 Sep 16

Acton said :

Interest rates this low could not even be imagined by the most optimistic Reserve Bank governor. Housing costs are higher now because the income, standards and expectations of first and second home buyers are so much higher. I hesitate to say this, but with interest rates at a historic low point, modest unemployment, negligible inflation, stable petrol prices ….we’ve never had it so good.

Yep – but I wonder whether the combination of low unemployment & the current historically low interest rates will mean that when those factors change, many will be very over committed because of the incredibly high cost of housing in the ACT (which is due in no small part to the ACT Labor/Greens Gov’t policy of drip feeding land releases) and the rapidly escalating Annual Rates, Levies & other ACT Govt charges.

dungfungus 7:58 am 28 Sep 16

Acton said :

dungfungus said :

Acton said :

1989. Home loan interest rates rise to 17%. That’s mortgage stress.

I don’t recall home interest rates being at 17% in 1989 but I remember being charged 22.5% on my home and being forced to sell it at 25% below its value in 1984.

That’s stressful.

It is about to happen again to many in Canberra.

Definitely 17% in 1989:
http://www.abs.gov.au/AUSSTATS/abs@.nsf/2f762f95845417aeca25706c00834efa/dbd46552aa41b8deca2570ec00787a56!OpenDocument

22.5% in 1984 would have been well above normal bank mortgage rates, which at that time were around 12%. Imagine if borrowers had to face those rates now.

The rate I was paying in 1984 was 17.5% plus a 5% surcharge as I wasn’t living in the home at that time. The home was interstate and vacant due to a regional recession. I had moved to Canberra to get work. To the credit of the bank involved, they refunded me all the surcharge interest accrued when I explained the circumstances.

I was also employed in the banking sector and the 17% plus rates were not “general” in 1989.

I know the ABS link you provided says otherwise but there is also a disclaimer on that page which says: “(a) The housing interest rate is the interest rate applicable on the last working day of the month to standard variable rate loans for owner occupation of large bank housing lenders. It is either the predominant rate or a representative rate (or range of rates) of major banks, although some banks may quote rates outside the range.”

With the source of the information being the Commonwealth Bank (who can believe anything they say) I suggest the information supplied to the ABS at that time was a bit woolly.

A better source of accurate information on “mortgage stress” in Canberra would be from our local debt collectors who actually knock on doors.

Acton 11:32 pm 27 Sep 16

Garfield said :

Acton said :

1989. Home loan interest rates rise to 17%. That’s mortgage stress.

It all depends on how much people have had to borrow. Interest on $100,000 at 17% is the same as interest on $400,000 at 4.25%.

You are not accounting for much lower wages in 1989 compared to now, so 17% on $100k then made houses and mortgages far less affordable than 4.25% on $400k now, because the repayments took a greater chunk out of your (lower) after tax disposable income. Many young families at that time couldn’t afford much else after meeting the mortgage payment. Mortgage stress was evidenced by sheets covering the windows because we (us and our neighbours) couldn’t afford curtains. Bean bags were standard furniture. I could go on but you would start rolling your eyes.

Interest rates this low could not even be imagined by the most optimistic Reserve Bank governor. Housing costs are higher now because the income, standards and expectations of first and second home buyers are so much higher. I hesitate to say this, but with interest rates at a historic low point, modest unemployment, negligible inflation, stable petrol prices ….we’ve never had it so good.

Acton 11:01 pm 27 Sep 16

dungfungus said :

Acton said :

1989. Home loan interest rates rise to 17%. That’s mortgage stress.

I don’t recall home interest rates being at 17% in 1989 but I remember being charged 22.5% on my home and being forced to sell it at 25% below its value in 1984.

That’s stressful.

It is about to happen again to many in Canberra.

Definitely 17% in 1989:
http://www.abs.gov.au/AUSSTATS/abs@.nsf/2f762f95845417aeca25706c00834efa/dbd46552aa41b8deca2570ec00787a56!OpenDocument

22.5% in 1984 would have been well above normal bank mortgage rates, which at that time were around 12%. Imagine if borrowers had to face those rates now.

Garfield 9:26 pm 27 Sep 16

Acton said :

1989. Home loan interest rates rise to 17%. That’s mortgage stress.

It all depends on how much people have had to borrow. Interest on $100,000 at 17% is the same as interest on $400,000 at 4.25%.

bj_ACT 9:05 pm 27 Sep 16

John Moulis said :

According to the map, Pearce is in the red zone for mortgage stress. I find that a bit hard to fathom. Pearce has largely an older demographic who have owned their homes for several years. My parents paid their last home repayment in 1984. I’d like to know the methodology used in compiling this report. Seems to me they’ve used the boundaries of the old Brindabella electorate which lumped Chifley, Pearce and Torrens in with Tuggeranong and applied the same brush to the whole area.

I think you read the map wrong. It’s Kambah, Wanniassa, Oxley, Greenway and outer Tuggeranong that are coloured RED not Pearce. But the map is a little unclear without close inspection.

If you read the full report by DFA ‘no other’ Canberra Postcodes/Suburbs make the worst 100 stressed areas in Australia. A clear sign that this is not an issue affecting other areas of Canberra as much as it does this small pocket.

dungfungus 6:35 pm 27 Sep 16

Acton said :

1989. Home loan interest rates rise to 17%. That’s mortgage stress.

I don’t recall home interest rates being at 17% in 1989 but I remember being charged 22.5% on my home and being forced to sell it at 25% below its value in 1984.

That’s stressful.

It is about to happen again to many in Canberra.

dungfungus 6:30 pm 27 Sep 16

bj_ACT said :

dungfungus said :

The credibility of this report is immediately thrown into doubt as it refers to a suburb named Tuggeranong.

There is no such suburb and there is no postcode 2900 relating to that name.

The closest is Tuggeranong DC with a post code of 2901.

The owner of this address is Australia Post and while they are not travelling too well either I doubt if they are experiencing “mortgage stress”.

Dungfungus – You might want to do some research before casting other far more eminent experts research into doubt. There is a suburb called Tuggeranong and it covers farm houses and reserves west of Kambah and down the south of Banks (in fact you can see it as area number 2 on the map pictured in the article)

You might also like to see it listed for the Postcode 2900 (I imagine 97% of that postcodes population is Greenway residents) http://www.postcodes-australia.com/postcodes/2900

The most important issue however…… that was not properly understood and not accurately provided in updated comment in the report above. Is that while Canberra’s unemployment has dropped 1.8%, Kambah’s Unemployment has only dropped 0.1% in the same period. Newstart numbers for the Kambah postcode have increased by a crazy 25% over an 18 month period. Kambah’s size and mix of wealth and poor areas masks the Unemployment rate in comparison to say Symonston or Charnwood (but parts of Kambah have huge social issues and the area has been totally ignored by ACT Government and also by ACTCOSS who should know better).

Kambah has a high proportion of single parents, blue and pink collar workers and low income homeowners. School closures have created increasing education issues that can be seen in plummeting NAPLAN results and the lack of any entertainment opportunities in the area for youth and poorer families. It should be a badge of shame for the likes of Joy Burch and Mick Gentleman.

I no longer live in Kambah, but I am saddened to see what has happened to many of it’s struggling residents and its run down shops and facilities. How can Canberra have the most Mortgaged Stressed area in Australia? Have we lost our ability as Canberran’s to support disadvantaged areas and only care about our immediate suburb?

I did my research and according to the NSW / ACT Postcodes in the current phone book there is no entry for the name Tuggeranong or a postcode for Tuggeranong.

Greenway is listed as 2900 but not Tuggeranong.

John Moulis 5:16 pm 27 Sep 16

John Moulis said :

According to the map, Pearce is in the red zone for mortgage stress. I find that a bit hard to fathom. Pearce has largely an older demographic who have owned their homes for several years. My parents paid their last home repayment in 1984. I’d like to know the methodology used in compiling this report. Seems to me they’ve used the boundaries of the old Brindabella electorate which lumped Chifley, Pearce and Torrens in with Tuggeranong and applied the same brush to the whole area.

My bad. I’ve just re-examined the map and Pearce is not in the red zone. The labelling of the map is very poor and it has been poorly drawn. One thing they should do is switch to Google Maps if they put out another report.

Acton 4:49 pm 27 Sep 16

1989. Home loan interest rates rise to 17%. That’s mortgage stress.

John Moulis 4:46 pm 27 Sep 16

According to the map, Pearce is in the red zone for mortgage stress. I find that a bit hard to fathom. Pearce has largely an older demographic who have owned their homes for several years. My parents paid their last home repayment in 1984. I’d like to know the methodology used in compiling this report. Seems to me they’ve used the boundaries of the old Brindabella electorate which lumped Chifley, Pearce and Torrens in with Tuggeranong and applied the same brush to the whole area.

bj_ACT 2:02 pm 27 Sep 16

dungfungus said :

The credibility of this report is immediately thrown into doubt as it refers to a suburb named Tuggeranong.

There is no such suburb and there is no postcode 2900 relating to that name.

The closest is Tuggeranong DC with a post code of 2901.

The owner of this address is Australia Post and while they are not travelling too well either I doubt if they are experiencing “mortgage stress”.

Dungfungus – You might want to do some research before casting other far more eminent experts research into doubt. There is a suburb called Tuggeranong and it covers farm houses and reserves west of Kambah and down the south of Banks (in fact you can see it as area number 2 on the map pictured in the article)

You might also like to see it listed for the Postcode 2900 (I imagine 97% of that postcodes population is Greenway residents) http://www.postcodes-australia.com/postcodes/2900

The most important issue however…… that was not properly understood and not accurately provided in updated comment in the report above. Is that while Canberra’s unemployment has dropped 1.8%, Kambah’s Unemployment has only dropped 0.1% in the same period. Newstart numbers for the Kambah postcode have increased by a crazy 25% over an 18 month period. Kambah’s size and mix of wealth and poor areas masks the Unemployment rate in comparison to say Symonston or Charnwood (but parts of Kambah have huge social issues and the area has been totally ignored by ACT Government and also by ACTCOSS who should know better).

Kambah has a high proportion of single parents, blue and pink collar workers and low income homeowners. School closures have created increasing education issues that can be seen in plummeting NAPLAN results and the lack of any entertainment opportunities in the area for youth and poorer families. It should be a badge of shame for the likes of Joy Burch and Mick Gentleman.

I no longer live in Kambah, but I am saddened to see what has happened to many of it’s struggling residents and its run down shops and facilities. How can Canberra have the most Mortgaged Stressed area in Australia? Have we lost our ability as Canberran’s to support disadvantaged areas and only care about our immediate suburb?

Garfield 12:28 pm 27 Sep 16

dungfungus said :

The credibility of this report is immediately thrown into doubt as it refers to a suburb named Tuggeranong.

There is no such suburb and there is no postcode 2900 relating to that name.

The closest is Tuggeranong DC with a post code of 2901.

The owner of this address is Australia Post and while they are not travelling too well either I doubt if they are experiencing “mortgage stress”.

Greenway has a postcode of 2900 and includes the Tuggeranong town centre, so I think you’re going too far in questioning the credibility of the report as you’ve done above.

dungfungus 9:47 am 27 Sep 16

The credibility of this report is immediately thrown into doubt as it refers to a suburb named Tuggeranong.

There is no such suburb and there is no postcode 2900 relating to that name.

The closest is Tuggeranong DC with a post code of 2901.

The owner of this address is Australia Post and while they are not travelling too well either I doubt if they are experiencing “mortgage stress”.

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