Negative Equity Comes to Perth Home Owners

WA homeowners increasingly are faced with a shortfall in what their property is worth and the size of the mortgage. Worst hit are low to middle-income earners in Perth's fringe suburbs who bought at the peak of the boom in mid-2006.

Property repossessions almost doubled in WA in the year to September. Consumer Credit Legal Service now field enquirers from those who have lost their job or become ill and therefore missed payments, several times a week. This is up from only the rare call as a little as a 2 months ago.

Alison Pidgeon of the Legal Service is quoted as saying:

"In some cases the property has already been sold and the financial institution is demanding payment of the shortfall. It is not unusual to see shortfall debts of $20,000 to $40,000."

Experts agree that negative equity will become a serious issue if unemployment or interest rates go up next year.  So far the biggest losers appear to be investors who have forced to sell, with some reportedly taking a $100,000 loss per a property.

Unfortunately there are always a risk of spectacular melt-down with a boom-times economy like WA. Few over the last few years appeared to remember the 1980's when there was no work to be had and geologists drove the taxis.  Many people appear to have little in the way of savings and a lot in the way of consumer debt and toys. The repo firms are one of the few industries to be taking on staff at the moment and were quoted on local TV as being happy to repossess boats and jet skis - as they are "just toys". Unfortunately they may well be repossessing some far more serious assets, such as the family home, in the next few months.

Oddly enough the party still seems to be on if the crowds out Christmas shopping are anything to go by - now I think might be a very good time to be far, far ahead on your mortgage repayment schedule rather than out buying more toys....