What is negative equity? Negative equity occurs when the value of your property is less than the outstanding balance on your home loan. Ben Phillips, principal research fellow at the National Centre for Social and Economic Modelling, helped prepare an analysis which pointed to 60,000 households nationwide with negative equity.
While the percentage of home owners with so-called negative equity remains tiny – about one in fifty of the 3 million households with mortgages – the number may well swell in 2012 if home prices extend their declines as some analysts expect.
National city home prices retreated 4 per cent in the year to October 2011 after peaking at the end of 2010, according to RP Data figures.
The final weekend auctions for 2011 indicated the interest rate cuts hadn’t reversed that slide, with Sydney’s clearance rate and median price, for instance, both ending the season at lows for 2011.
Mainstream commentators, such as Westpac economists, predict home prices to be flat or lower in 2012, with worries about the European crisis and a greater reluctance by households to take on debt even as borrowing costs contract nullifying the impact of the RBA cuts.
In Queensland, 19,700 households are estimated to be in negative equity, or 3.2 per cent of the state’s mortgage holders.
While in Western Australia, the total amounts to about 4.5 per cent, or 16,000. New South Wales had the smallest share of mortgages under water, at 1 per cent, or 9000, slightly better than Victoria’s rate which was 1.2 per cent or 9100, although the latter’s household debt levels are drawn from 2010 data.
In South Australia 2.1 per cent of households, or 5000, were in negative equity. Tasmania had 1.5 per cent of households, or 1100, according to the analysis.