Showing posts with label equity. Show all posts
Showing posts with label equity. Show all posts

Friday, March 23, 2012

The risk of falling prices

Financial comparison website RateCity CEO Damian Smith said borrowers who have taken on a home loan with a small deposit are most at risk from the impact of falling prices.

For example, if a property was purchased for $400,000 with a 5 per cent deposit, but then that house price fell by 10 per cent, instead of having $20,000 of equity value in the property, there would be none at all.

"If you try to refinance in those circumstances, you will find yourself owing more than the property is worth - a mortgage of $380,000 as against property value of just $360,000," Mr Smith said.

Average Australian capital city property values fell by 3.6 per cent in 2011, according to the latest RP Data-Rismark Home Value Index. For a $400,000 home, that decline translates to a new value of $385,600. Property values declined in every capital city with Brisbane experiencing the biggest fall of 6.8 per cent. Full story here

Thursday, March 22, 2012

Negative Equity

The share of homes with mortgages worth more than the property's value increased at the end of last year as the housing market stalled and prices turned lower. The rise suggests an increase in negative equity, where a mortgage can be worth more than the value of a house. Property information group RP Data said that 6.4 per cent of homes were valued at less than their purchase price in the December 2011 quarter, rising from 4.9 per cent of the market in the September quarter. By city, Brisbane fared the worst with 9.2 per cent of property deemed to be "underwater" in financial terms, followed by fellow mining state capital Perth at 7.4 per cent.
See Brisbane Times, Smart Company and Business Spectator

Friday, January 20, 2012

Home Equity

A summary from the recent September 2011 Quarter RP Data home equity report.

The highlights of the report are:
  • Over the five years to September 2011, capital city home values increased by around 28 per cent.
  •  Australian housing markets recorded value declines recently with capital city home values down 3.3 per cent from their October 2010 peak to September 2011.
  • Properties in Queensland and South Australia have higher turnover rates; therefore equity levels in these states tend to be lower than in other states.
  • Far North Queensland & the Gold and Sunshine Coasts have the highest instances of negative equity at 20.2%, 14.0% and 13.5% respectively. 
  • The highest proportion of homes that are now worth at least double their initial purchase price is typically either regional and non-coastal, or capital city markets. 
  • Capital cities have enjoyed long-term value appreciation and have proven to be less susceptible to ongoing value falls than certain non-capital city markets.