The word “delinquent” may prompt thoughts of James Dean as the bad boy in the leather jacket in the classic ’50s movie, Rebel Without a Cause.
But in the banking sector, delinquent is the term for mortgage holders who fall more than 30 days behind in their monthly repayments.
And, it seems, it’s definitely back to the bad old ’50s because, Australia, you have been very, very bad lately – and it looks as if your bad habits will continue.
The delinquency rate rose to 1.52 per cent in November 2016 from 1.20 per cent in November 2015. And the rates rose in every state and territory with record highs in Western Australia, South Australia and the Northern Territory.
The end of the mining boom has seen Western Australia record the country’s highest delinquency rate of any state or territory. It’s no wonder because WA’s unemployment rate is at 6.04 per cent and has been climbing since 2013, while the national average is now at 5.87 per cent.
At the other end of the spectrum, the ACT holds school-prefect status with the lowest number of delinquencies.
Although NSW did record an increase in 2016, delinquencies there have declined over the last four years – despite the runaway train houses prices of Sydney during that period.
View.com.au chief executive Enzo Raimondo says a look at these tables reveals some fundamentals about real estate. And it’s useful advice for anyone buying or selling property anywhere in Australia, in any economic cycle.
“If the area you live in is reliant on one industry, then there are always going to be issues,” he says.
“WA rode the highs and now it is riding the lows.”
According to Raimondo, WA will have to make efforts to diversify its industry to avoid this vicious cycle. “A lot of Perth hangs off the mining industry,” he says.
And that will take time.
But he warns this up-and-down cycle can happen in any region where employment and income are dominated by one industry.
Tourism, for example, has been seen as a saviour for some regions that have reinvented themselves as vibrant visitor hotspots when old manufacturing industries have declined.
But it, too, is subject to the unpredictable. If the North Korean war of words escalates, will that have an effect on tourism, especially for the growing Chinese market?
Raimondo says a town or region really needs a “suite” of employment in several industries to protect itself from the economic stress that results in mortgage delinquencies.
Factors to consider include whether the biggest nearby town has an airport, hospital, educational or military institution.
These factors are present in the best performing suburbs or towns in Australia in terms of mortgage repayment behaviour, and not present in the worst, which is the problem that afflicts WA.
According to a Moody Investment Services report, Australia’s bad behaviour is set to continue.
“We expect mortgage delinquencies to continue to increase over 2017. Weaker conditions in states reliant on the mining industry, high underemployment, and less favourable housing and income dynamics will drive delinquencies higher,” it reported.