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Index

Australian Mortgage Delinquency by Postcode – 31 March 2014 of 21

AUSTRALIA

Australian Mortgage Delinquency by Postcode 31 March 2014

Contacts

James Zanesi

+61 2 8256 0306

[email protected]

Natasha Vojvodic

+61 2 8256 0350

[email protected]

Vickie Brumwell

Investor Relations

+61 2 8256 0305

[email protected]

Data Download

Australian Mortgage Delinquency by Postcode – 31 March 2014 Data (July 2014)

Related Research

Australian Mortgage Delinquency by Postcode – 30 September 2013 (December 2013)

Mortgage Market Index - The Dinkum Index – 1Q14 (June 2014)

Budgewoi Worst Postcode: Budgewoi (NSW) replaced Surfers Paradise (QLD) as

the worst-performing postcode by value of mortgages in arrears, with 3.7% of

mortgages secured by a property delinquent at end-March 2014 up 60bp from

end-September 2013. Arrears in Surfers Paradise benefitted significantly from a

rebound in the Gold Coast housing market. Budgewoi has been among the worst

performing postcodes each March and September over the five years since March

2009, with the exception of September 2012.

Hume Worst Region: Hume (VIC) was the worst performing region in Australia,

with a delinquency rate of 2.93%, the highest level since early 2008. Hume (VIC),

Melton-Wyndham (VIC) and Northern Outer Melbourne continued to show a

significant deterioration in mortgage performance. In the six months to March

2014 the delinquency rate in these regions increased on average by 59bp,

compared with an average rise of 11bp nationally.

Worsening Signals in Victoria: Victoria was characterised by an unexpected

deterioration in mortgage performance, with an overall delinquency rate of

1.37%. For the first time since this report was published, the state performed

worse than New South Wales (1.32%). Seven of the worst performing suburbs

(four of the top five) were located in Victoria. No region in Victoria was among the

best-performing regions by value of mortgages.

Little Divergence Across States: There was little divergence in performance among the six states, with all states experiencing delinquency rates

between 1.31% and 1.42%. The 11bp gap between the worst- and best-performing state indicates that borrowers across the states are in a similar

situation in terms of serviceability.

Gold Coast Housing Rebound: Gold Coast East was the region that improved the most in the six months to March 2014, as arrears declined by 36bp

to 1.64%. The recent stabilisation in the housing market and economy has resulted in higher auction clearance rates of foreclosed properties. This, in

turn, reduced 90+ days arrears, which fell to 0.62% at end-March 2014 from 1.22% at end-March 2013.

20 Worst Performing Australian Postcodes

Number of postcodes in brackets

Source: ABS, Fitch

NT

SA

WA

QLD

NSW

VIC

TAS

Palm Cove

Salisbury

Kalgoorlie

Brisbane (4)

Melbourne (7)Sydney (6)

mailto:[email protected]



http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=751693


https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=725535




Index


Residential Loan Performance by Postcode

20 Worst Performing Australian Postcodes by Value

As of 31 March 2014 As of 30 September 2013

Rank Post code State Suburb

30+ day arrears

(%) Post code State Suburb

30+ day arrears

(%)

1 2262 NSW Budgewoi 3.7 4217 QLD Surfers Paradise 4.0 2 3228 VIC Torquay 3.7 2571 NSW Wilton 3.9 3 3756 VIC Wallan 3.5 2322 NSW Beresfield/Hexham 3.7 4 3337 VIC Melton 3.5 2325 NSW Cessnock 3.7 5 3975 VIC Lynbrook 3.5 3040 VIC Essendon 3.5 6 2168 NSW Green Valley 3.4 2558 NSW Eagle Vale 3.5 7 4879 QLD Palm Cove 3.3 3337 VIC Melton 3.3 8 3214 VIC Corio 3.2 2575 NSW High Range 3.3 9 3064 VIC Craigieburn 3.2 3048 VIC Coolaroo 3.2 10 3024 VIC Wyndham Vale 3.1 5096 SA Para Hills 3.2 11 6430 WA Kalgoorlie 3.1 6330 WA Albany 3.2 12 2749 NSW Castlereagh 3.1 2766 NSW Rooty Hill 3.1 13 5108 SA Salisbury 3.0 2262 NSW Budgewoi 3.1 14 2171 NSW Hoxton Park 3.0 4114 QLD Kingston 3.1 15 4280 QLD Jimboomba 3.0 4341 QLD Laidley 3.0 16 4114 QLD Kingston 3.0 2164 NSW Smithfield 2.9 17 4510 QLD Caboolture 3.0 4507 QLD Bribie Island 2.9 18 2753 NSW Richmond 3.0 7010 TAS Montrose 2.8 19 2761 NSW Plumpton 2.9 2142 NSW Granville 2.7 20 4217 QLD Surfers Paradise 2.9 7030 TAS Bridgewater/Brighton 2.7

Source: Fitch, ABS

Budgewoi (NSW) replaces Surfers Paradise (QLD) as the worst performing postcode by value of

mortgages in arrears as of 31 March 2014. Budgewoi has been among the worst-performing postcodes

over the past five years, appearing in nine of the 10 surveys up to 31 March 2014. Other postcodes that

have previously been among the worst performing since September 2007 were Green Valley (18 times),

Surfers Paradise (8), Hoxton Park (5), Kingston (4), Richmond (4), and Plumpton (4).

Only four suburbs remained in the top 20 worst performing from six months earlier: Kingston (QLD),

Melton (VIC), Budgewoi (NSW) and Surfers Paradise (QLD).

Victoria dominates the list of the worst 20 suburbs for the first time, with seven entries (VIC) had only

three suburbs six months earlier). New South Wales (NSW) follows with six (previously nine), while

Queensland has five (previously four) and WA and SA have one each (previously none and one,

respectively). Tasmania had two postcodes in the 20 worst performing in the last survey, but none as of

March 2014.

Kalgoorlie (WA) was among the worst-performing suburb for the first time. Kalgoorlie is a mining town

located in the regional areas Western Australia, and was the worst-performing suburb in that state.

Kalgoorlie has recently experienced one of the most severe economic downturns in the last 20 years.

20 Worst Performing Australian Postcodes – Excluding Sydney and Brisbane

Source: ABS, Fitch

NT

SA

WA

QLD

NSW

VIC

TAS

4879

Palm Cove

5108

Salisbury

6430

Kalgoorlie

Index


Almost all the 20 worst-performing postcodes were located in metropolitan regions, specifically in

regions characterised by weak socio-economic variables (Western Sydney, North West Melbourne,

South Brisbane).

Six of the 20 worst-performing postcodes were in New South Wales, and they were all located in South

West and Western Sydney – with the exception of Budgewoi.

Five of the worst-performing postcodes were located in Queensland, three of which were in the Logan

City/Gold Coast area.

Surfers Paradise (QLD) and Palm Cove (QLD) were the only popular tourism destinations among the

worst-performing postcodes. Tourism had been a hallmark of the worst-performing locations between

2008 and 2013; however, these areas have generally improved as the property market has recovered.

20 Worst Performing Australian Postcodes – Sydney

Source: ABS, Fitch

SYDNEY

2262,

Budgewoi

2171, Hoxton Park

2168, Green Valley

2753, Richmond

2761, Plumpton

2749, Castlereagh/

Cranebrook

20 Worst Performing Australian Postcodes – Brisbane

Source: ABS, Fitch

BRISBANE

4217

Surfers Paradise

4114

Kingston

4280

Jimboomba

4510

Caboolture

Index


The seven postcodes in Victoria were located in North West Melbourne (4), the Geelong area (2) and

South East Outer Melbourne (1).

Fitch believes it is likely that the borrowers whose properties are located in these postcodes will continue

to underperform the rest of the country – due to the employment environment in North West

Melbourne.

20 Worst Performing Australian Postcodes by Number


Rank Post code State Suburb

30+ day arrears

(%) Post code State Suburb

30+ day arrears

(%)

1 3975 VIC Lynbrook 2.7 2325 NSW Cessnock 3.0 2 3337 VIC Melton 2.7 2558 NSW Eagle Vale 2.7 3 3214 VIC Corio 2.6 3337 VIC Melton 2.5 4 2168 NSW Green Valley 2.6 4502 QLD Petrie 2.5 5 6167 WA Casuarina 2.6 2322 NSW Beresfield/Hexham 2.4 6 2262 NSW Budgewoi 2.5 4217 QLD Surfers Paradise 2.3 7 3064 VIC Craigieburn 2.5 3048 VIC Coolaroo 2.3 8 3756 VIC Wallan 2.5 5096 SA Para Hills 2.3 9 5108 SA Salisbury 2.4 4341 QLD Laidley 2.2 10 6430 WA Kalgoorlie 2.4 4114 QLD Kingston 2.1 11 2325 NSW Cessnock 2.2 4132 QLD Crestmead/Marsden 2.1 12 2745 NSW Glenmore Park 2.2 2766 NSW Rooty Hill 2.1 13 2761 NSW Plumpton 2.2 2571 NSW Wilton 2.1 14 4132 QLD Crestmead/Marsden 2.1 6330 WA Albany 2.1 15 3024 VIC Wyndham Vale 2.1 2164 NSW Smithfield 2.0 16 4510 QLD Caboolture 2.1 6167 WA Casuarina 2.0 17 4720 QLD Emerald 2.1 2262 NSW Budgewoi 2.0 18 4114 QLD Kingston 2.1 7030 TAS Bridgewater/Brighton 2.0 19 3043 VIC Tullamarine 2.1 3023 VIC Burnside 1.9 20 4280 QLD Jimboomba 2.0 6056 WA Midland 1.9

Source: Fitch, ABS

As was the case in the data on dollar volume, the figures based on number of loans in arrears also

highlight the worsening trend in Victoria, which has seven of the 20 worst-performing postcodes.

Queensland and NSW both have five, WA has two, while SA only one. Lynbrook (VIC) and Melton (VIC)

replaced Cessnock (NSW) as the worst-performing postcodes by number of mortgages in arrears, with

27 borrowers out of 1,000 in delinquency.

Green Valley (NSW), Lynbrook (VIC), Crestmead/Marsden (QLD), Salisbury (SA), and Casuarina (WA)

were the worst-performing postcodes in their respective states with, with 20-30 borrowers out of 1,000

in delinquency.

20 Worst Performing Australian Postcodes – Melbourne

Source: ABS, Fitch

3228

Torquay

3756, Wallan

3337, Melton

3975

Lynbrook

MELBOURNE3214, Corio

3064, Craigieburn

3024, Wyndham Vale

Index


Residential Loan Performance by Region

There is a clear distinction between best- and worst-performing regions in a given time frame, although

trends vary with local economic cycles. Regions within each state that show strong sensitivity to

mortgage rates due to socio-economic factors such as high unemployment and low-income households,

have historically benefitted the most from falling mortgage interest rates. These regions tend to be

located in the south west and western suburbs of Sydney (Outer West, Outer South West, Fairfield-

Liverpool, Blacktown), south west of Brisbane (Ipswich, Logan City), and north west of Melbourne

(Melton, Hume).

Delinquency rates in these regions have increased by more than the average in the six months to 31

March 2014 as they are sensitive to Christmas over-spending and general cost-of-living pressures.

The focus has shifted since September 2013 to north west Melbourne as the worst-performing regions,

having historically been the south west and western suburbs of Sydney. Fitch believes that the

divergence in mortgage performance reflects the current economic trends in the respective states.

Hume (VIC), Melton-Wyndham (VIC) and Northern Outer Melbourne continued to deteriorate in

mortgage performance.

Fitch expects these regions to continue to perform poorly relative to other locations, as their

performance is driven by socio-economic variables.

Mackay (QLD), Fitzroy (QLD) and Darling Downs & West Moreton (QLD) have also experienced an

increase in delinquency rates during the six months to March 2014, recording an average increase in 30+

days delinquency rate by 48bp – far above the 11bp rise in the national average.

The three non-metropolitan areas of Western Australia (excluding Perth), Murray-Murrumbidgee (NSW)

and Richmond-Tweed (NSW) are among the worst-performing regions. Western Australia (excluding

Perth) and Murray-Murrumbidgee (NSW) were also among the worst performers in September 2013.

Australia – 30+ Day Delinquencies0.00% To 0.45%

0.45% To 0.90%

0.90% To 1.35%

1.35% To 1.80%

1.80% To 2.25%

>2.25%

1 Northern QLD 1.33

2 Mackay 1.86

3 Fitzroy 1.50

4 Wide Bay-Burnett 1.70

5 Sunshine Coast 1.63

6 Darling Downs 1.65

7 Richmond-Tweed 1.99

8 North NSW 1.55

9 Hunter 1.73

10 Illawarra 1.49

11 South East NSW 1.56

12 ACT 0.88

13 Murray Murrumbidgee 2.00

14 Mallee,Wimmera & Loddon1.43

15 Western VIC 1.43

16 Barwon 1.56

17 Goulburn & Ovens Murray 1.82

18 Gippsland 1.54

Western

Australia

(excl Perth)

2.08

Northern

Territory

1.10

1.73

South

Australia

(excl. Adelaide)

1.519

North West NSW 1.48

Tasmania

1.40

Far North and West

1

2

34

67

8

9

1011 12

1314

15

16

1718

5

Source: ABS, Fitch

South

West WA

1.58

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 Dec 12 Mar 13 Jun 13 Sep 13 Dec 13 Mar 14

Central Coast Sydney Central Metropolitan Perth Hume City

Inner Brisbane Inner Sydney Logan City (incl_ Beaudesert Shire)

Lower Northern Sydney Melton-Wyndham Southeast Inner Brisbane

WA Regional Australia

(%)

Australia - Historical 30+ Day Arrears of Selected Regions

Source: Fitch

Index


10 Worst Performing Australian Regions

10 Worst Performing Regions in Australia by Value As of 31 March 2014 As of 30 September 2013

Rank Fitch Region State

30+ day arrears

(%) Fitch Region State

30+ day arrears

(%)

1 Hume City VIC 2.93 Hume City VIC 2.10 2 Central Coast Sydney NSW 2.08 Caboolture Shire QLD 2.04 3 WA (excl. Perth) WA 2.08 Gold Coast East QLD 2.00 4 Logan City (& Beaudesert) QLD 2.05 Fairfield-Liverpool NSW 1.86 5 Melton-Wyndham VIC 2.04 Logan City (& Beaudesert) QLD 1.84 6 Caboolture Shire QLD 2.03 Central Coast Sydney NSW 1.83 7 Murray & Murrumbidgee NSW 2.00 Gold Coast West QLD 1.83 8 Richmond-Tweed NSW 1.99 Outer South West Sydney NSW 1.76 9 Outer Western Sydney NSW 1.97 WA (excl. Perth) WA 1.76 10 Fairfield-Liverpool NSW 1.92 Murray & Murrumbidgee NSW 1.75

10 Worst Performing Regions in Australia by Number



30+ day arrears


30+ day arrears

(%)

1 Hume City VIC 2.16 Hume City VIC 1.58 2 Melton-Wyndham VIC 1.66 Murray & Murrumbidgee NSW 1.47 3 WA Regional WA 1.57 Caboolture Shire QLD 1.46 4 Logan City (& Beaudesert) QLD 1.56 Gold Coast West QLD 1.40 5 Murray & Murrumbidgee NSW 1.53 Melton-Wyndham VIC 1.39 6 Caboolture Shire QLD 1.52 Logan City (& Beaudesert) QLD 1.38 7 Outer Western Sydney NSW 1.40 North West NSW NSW 1.35 8 North West NSW NSW 1.38 Far North and West QLD QLD 1.31 9 Central Coast Sydney NSW 1.36 Central Coast Sydney NSW 1.27 10 Hunter NSW 1.34 Ipswich City QLD 1.25

Source: Fitch, ABS

Hume City (VIC) is still the worst-performing region in Australia by both dollar value and number of

mortgages, as was the case in September 2013. Fairfield-Liverpool (NSW) had been the worst-

performing region since March 2006, with the exception of September 2012 when it was replaced by

the Gold Coast East (QLD).

At a regional level, New South Wales continues to dominate the worst-performing regions (5).

However, only two regions were located in Queensland (versus four in September 2013).

Seven of the ten worst-performing regions were also among the worst performing regions in

September 2013.

Coastal regions in Queensland such as Gold Coast and Sunshine Coast continued to show a significant

improvement in performance over the 12 months to March 2014. The Gold Coast East and West are no

longer among the worst-performing regions, following a rebound in the local housing market.

The Gold Coast East was the region with the greatest improvement in mortgage performance in

Australia during the six months to March 2014 (37bp), thanks to a rebound in the local housing market

and the strong clearance rates that in turn reduced the level of 90+ days arrears.

Regions in South Australia performed in line with the rest of Australia.

Index


10 Best Performing Australian Regions

10 Best Performing Regions in Australia by Value As of 31 March 2014 As of 30 September 2013


30+ day arrears


30+ day arrears

(%)

1 Central Metropolitan Perth WA 0.37 Southeast Inner Brisbane QLD 0.45 2 Southeast Inner Brisbane QLD 0.54 Lower Northern Sydney NSW 0.49 3 Lower Northern Sydney NSW 0.55 Northern Middle Melbourne VIC 0.53 4 Inner Sydney NSW 0.60 NT NT 0.64 5 Inner Brisbane QLD 0.61 Northwest Inner Brisbane QLD 0.64 6 Eastern Suburbs NSW 0.73 Inner Sydney NSW 0.65 7 Inner Western Sydney NSW 0.75 Central Metropolitan Perth WA 0.66 8 Northwest Inner Brisbane QLD 0.77 Inner Melbourne VIC 0.70 9 Southeast Outer Brisbane QLD 0.77 Eastern Middle Melbourne VIC 0.70 10 Central Northern Sydney NSW 0.84 Moreland City VIC 0.74

10 Best Performing Regions in Australia by Number



30+ day arrears


30+ day arrears

(%)

1 Central Metropolitan Perth WA 0.30 Lower Northern Sydney NSW 0.35 2 Inner Sydney NSW 0.38 Boroondara City VIC 0.36 3 Lower Northern Sydney NSW 0.40 Southeast Inner Brisbane QLD 0.37 4 Eastern Suburbs NSW 0.40 Central Metropolitan Perth WA 0.38 5 Southeast Inner Brisbane QLD 0.40 Northern Middle Melbourne VIC 0.41 6 Boroondara City VIC 0.51 Eastern Suburbs NSW 0.42 7 Inner Western Sydney NSW 0.54 Eastern Middle Melbourne VIC 0.45 8 Inner Brisbane QLD 0.55 Moreland City VIC 0.45 9 Central Northern Sydney NSW 0.56 Inner Sydney NSW 0.46 10 Eastern Middle Melbourne VIC 0.57 Northwest Inner Brisbane QLD 0.48

Source: Fitch, ABS

The best-performing regions from previous reports have continued to exhibit strong mortgage

performance. Victoria underperformed the other states, as was the case for the worst-performing

regions.

For the first time since this report was published, no region from Melbourne was among the 10 best-

performing regions by value of mortgages. Fitch expects the rebound in the local housing market to

benefit delinquency rates in these regions.

The weighted-average delinquency rates in the 10 best-performing regions remained stable overall at

0.67%, 4bp up from 0.63% at 30 September 2013, versus the national average rise of 11bp. This is below

the 0.73% delinquency rate at end-March 2013.

On average, the best-performing regions have also shown a slight worsening in the number of borrowers

in arrears − five out of 1,000 (versus four out of 1,000 in September 2013).

Central Metropolitan Perth (WA) was the best-performing region by value, with a 0.37% delinquency rate

– and also by number of mortgages in arrears, with only three out of 1,000 borrowers in arrears.

Lower Northern Sydney (NSW), Southeast Inner Brisbane (QLD), and Central Metropolitan Perth (WA)

were still the best-performing regions in their respective states. In Victoria, Boroondara City was still the

best-performing region by number.

Index


Residential Loan Performance by State Queensland replaced Tasmania as the worst-performing state at end-

March 2014, although the gap between best- and worst-performing state

is at a record low at 11bp (versus the average of 76bp over the past eight

years).

Victoria and New South Wales dominate the worst-performing regions

and suburbs, although the worst-performing state is Queensland. This

indicates a lower level of volatility among Queensland regions, although

they have higher delinquency rates on average.

All states and territories other than Tasmania have experienced a slight

worsening in delinquency rates since end-September 2013, which was

expected given the seasonal Christmas spending.

Western Australia was still the best-performing state, with 1.31% of

delinquent loans. Western Australia has been characterised by a

remarkable improvement in mortgage performance since end-March

2011, when its delinquency rate was 1.99%.

The 30+ days delinquency rate in Victoria worsened by 17bp, the largest

increase in any state during the six months to end-March 2014.

Monetary Policy and Interest Rates Delinquencies across all six states are all below the levels at end-March

2013, indicating that monetary policy had a slight (albeit modest) positive

impact on mortgage performance, with 30+ days delinquency rates 10bp

lower in spite of the 90bp improvement in the SVR.

1Q14 3Q13

NSW 1.32 1.24 VIC 1.37 1.20 QLD 1.42 1.37 SA 1.38 1.26 WA 1.31 1.17 TAS 1.40 1.51 NT 1.10 0.64 ACT 0.88 0.83 Australia 1.35 1.24

Source: Fitch

Key Rating Drivers

Interest Rates

1Q14 3Q13

90+ days 0.50 0.49

30+ days 1.35 1.24 SVR 5.95 5.95

Source: Fitch, ABS

0.0

0.5

1.0

1.5

2.0

2.5

Mar 06 Mar 07 Mar 08 Mar 09 Mar 10 Mar 11 Mar 12 Mar 13 Mar 14

NSW VIC QLD SA WA

TAS NT ACT Australia(%)

Australia − Historical Performance of States and Territories

Source: Fitch

4

6

8

10

12

0.0

0.5

1.0

1.5

2.0

Mar 02 Mar 03 Mar 04 Mar 05 Mar 06 Mar 07 Mar 08 Mar 09 Mar 10 Mar 11 Mar 12 Mar 13 Mar 14

90+ days 30+days SVR (RHS)(%)

RMBS delinquencies vs Standard Variable Rate

Source: Fitch

(%)

Index


Property Prices Property Prices Sydney and Melbourne have had the strongest house-price appreciation

over the 12 months to March 2014 (15.6% and 11.6%, respectively).

Hobart and Darwin experienced a significant rebound in house prices in

the six months to March 2014 (6.1% and 6.5%, respectively).

House price appreciation is benefitting areas that were characterised by

an accumulation of properties in possession, especially in certain coastal

areas that are favourite locations for second homes or investment

properties, such as the Gold Coast (QLD).

Unemployment Rates South Australia and Victoria experienced the largest increase in

unemployment rate over the six months to end-March 2014 (1.2% and

0.6%, respectively), which was reflected in the increase in delinquency

rates.

The stabilisation in unemployment in Tasmania has benefitted

delinquency rates in the state. Fitch is still monitoring performance, as

the state has shown significant volatility in unemployment and economy.

Home Value Index

1Q14 3Q13

Sydney 762 702

Melbourne 669 627 Brisbane 482 459 Adelaide 440 427 Perth 614 595 Hobart 335 316 Darwin 526 493 Canberra 607 602 8 Cities 636 597

Source: RP Data/Rismark

Unemployment Rates*

1Q14 3Q13

NSW 5.51 5.62

VIC 6.90 5.87 QLD 6.66 5.83 SA 7.50 5.88 WA 5.37 4.69 TAS 7.63 7.96 NT 4.27 5.11 ACT 4.22 4.49 Australia 6.22 5.66

Source: Fitch, ABS

*seasonally adjusted

200

300

400

500

600

700

800


Sydney Melbourne Brisbane

Adelaide Perth Hobart

Darwin Canberra 8 Capital City Aggregate

Australia − Historical Dwelling Prices of States and Territories

Source: Fitch, RP Data / Rismark

0

1

2

3

4

5

6

7

8

9

10


NSW VIC QLD SA WA

TAS NT ACT Australia(%)

Australia − Historical Unemployment Rate of States and Territories

Source: Fitch, ABS

Index


New South Wales

This study has analysed the performance of about 228,000 mortgages in New South Wales for an

equivalent amount of AUD48bn. On average, 1.32% of the total mortgage balance was in arrears, lower

than the national average of 1.35%. Sydney is performing better than the rest of the state, with a

delinquency rate of 1.20%. The state has a well-diversified economy, with a stable housing market. The

main risk to household affordability is the rising cost of living.

Overall, all regions showed a stable performance despite the seasonal Christmas spending.

The Central Coast replaced Fairfield-Liverpool as the worst-performing region in the state. Budgewoi,

the worst-performing postcode in NSW, is also located in the Central Coast region.

The strong house-price appreciation in Fairfield-Liverpool, Blacktown, and Outer South Western

Sydney, reduced the time-to-sale of foreclosed properties, in turn limiting the accumulation of

delinquent loans in the 90+ days bucket.

Outer West Sydney, Fairfield-Liverpool, and the Central Coast continue as the worst-performing

regions, but their performance has improved in relative terms. The average income in these regions is

low, so households are still more vulnerable to changes in living costs and unemployment.

Sydney – 30+ Day Delinquencies

Canterbury/

Bankstown

1.16Inner West

0.75

St George/Sutherland

1.02

Inner Sydney

0.60

North West &

Western NSW

1.48

Illawarra

1.49

Fairfield/Liverpool

1.92

Outer West

1.97

Lower Northern

0.55

Hunter

1.73

Outer South Western

1.72

Central Western Sydney

1.19

Eastern

Suburbs 0.73

Central Coast Sydney

2.08

Central North

0.84

Blacktown

1.73

Source: ABS, Fitch

Northern Beaches

1.08

0.00% To 0.45%

0.45% To 0.90%

0.90% To 1.35%

1.35% To 1.80%

1.80% To 2.25%

>2.25%

0.0

0.5

1.0

1.5

2.0

2.5

3.0

Mar 11 Sep 11 Mar 12 Sep 12 Mar 13 Sep 13 Mar 14

90+ days 60-90 days

30-60 days 0-30 days(%)

Source: Fitch

New South Wales − Arrears

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

2004 2006 2008 2010 2012

Central Coast Sydney Eastern SuburbsInner Sydney Inner Western SydneyLower Northern Sydney Richmond-TweedMurray & Murrumbidgee Outer Western SydneyNSW

Source: Fitch, ATO, ABS

New South Wales − Historical Average Taxable Income of Selected Regions

(AUD)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0


Central Coast Sydney Eastern Suburbs Inner Sydney

Inner Western Sydney Lower Northern Sydney Richmond-Tweed

Murray & Murrumbidgee Outer Western Sydney Sydney(%)

New South Wales − Historical 30+ Day Arrears of Selected Regions

Source: Fitch

Index


Unemployment Rates Therefore, the unemployment rate, cost of living, and serviceability

remain key factors in mortgage performance in these regions.

Fitch has noticed a deterioration in mortgage performance in two

regional areas during the past 12 months, which had historically been

performing in line with the rest of NSW: Murray-Murrumbidgee and

Richmond-Tweed.

This may be due to unemployment. Unemployment in Richmond-

Tweed/Mid-North Coast of NSW has been historically above average,

especially since June 2012. Unemployment in Murray-Murrumbidgee has

been in line with the rest of NSW, and only recently has spiked in the

8.0% area. This has been reflected in a higher-than-average 30 days

arrears, as well as the strong migration from 30 to 90 days arrears. House

prices in Richmond-Tweed showed no signs of increasing, in contrast

with the rest of NSW, in turn explaining the continuing high 90+ days

delinquency rate of 0.82% as of March 2014.

Lower Northern Sydney and Inner Sydney are the best-performing

regions in NSW by number of borrowers in arrears, with four borrowers

out of 1,000 in arrears at end-March 2014. Lower Northern Sydney is also

the best-performing region in the state by value of mortgages in arrears,

with 0.55% 30+ days arrears.

4Q13 Central Coast Sydney 5.9 Eastern Suburbs 2.7 Inner Sydney 5.2 Inner Western Sydney 4.3 Lower Northern Sydney 4.9 Richmond-Tweed/ Mid-North Coast

6.3

Murray-Murrumbidgee 7.8 North Western Sydney 6.8 NSW 5.7

Source: Fitch, DEEWR, ABS

House Prices

1Q14 Central Coast Sydney 1.18 Eastern Suburbs 1.11 Inner Sydney 1.21 Inner Western Sydney 1.17 Lower Northern Sydney 1.25 Richmond-Tweed 1.02 Murray & Murrumbidgee 1.15 Outer Western Sydney 1.08 Sydney 1.16

Source: Fitch, RP Data/Rismark

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0



Inner Western Sydney Lower Northern Sydney Richmond-Tweed/ Mid-North Coast

Murray-Murrumbidgee North Western Sydney NSW(%)

New South Wales − Historical Unemployment Rate of Selected Regions

Source: Fitch, LMIP, ABS

0.9

1.0

1.1

1.2

1.3



Inner Western Sydney Lower Northern Sydney Richmond-Tweed

Murray & Murrumbidgee Sydney Outer Western Sydney

New South Wales − Historical Dwelling Prices of Selected Regions

Source: Fitch, RP Data / Rismark Mar 2011 = 1

(%)

Index


Victoria

Fitch analysed about 212,000 mortgages in Victoria for an equivalent amount of AUD41bn for this study.

Melbourne performed in line with the rest of Victoria, with a delinquency ratio of 1.33%. Victoria’s

strengths included a stable and diversified economy and satisfactory affordability.

However, arrears deteriorated more (or improved less) than in other states in the 18 months to March

2014, in contrast to the three years to end-September 2012 when Victoria consistently outperformed

other states.

The rising unemployment rate is the likely cause of such an unexpected rise in the delinquency rate. The

unemployment rate in Victoria was 6.4% at 31 March 2014, well above historical levels.

The rise in delinquencies is concentrated in the outer northern and outer west regions of Melbourne.

Therefore, Fitch believes such a trend has to deal with serviceability and unemployment in these

regions.

In contrast, the state’s property market has experienced a rebound in the 12 months to March 2014,

following a decline in 2012 and 2013. As of end-March 2014 property prices in Melbourne are 4% above

their peak in late 2010.

Melbourne – 30+ Day Delinquencies

Source: ABS, Fitch

Western VIC

1.43

Mallee, Wimmera

& Loddon

1.43

Hume

2.93

Melton

2.04

Barwon

1.56

Southern

0.91

Yarr

a

1.15

Northern

Outer

1.80

Goulburn Ovens-Murray

1.82

Sourth Eastern

Outer Melbourne

1.68

Mornington

Peninsula

1.64Greater

Dandenong

1.53

Gippsland

1.54

Frankston

1.16

Moreland

0.85Northern

0.88

Boroondara

0.89Inner

0.85Eastern

0.87

Outer

1.35

Western

1.32

0.00% To 0.45%

0.45% To 0.90%

0.90% To 1.35%

1.35% To 1.80%

1.80% To 2.25%

>2.25%

0.0

0.5

1.0

1.5

2.0

2.5

3.0


90+ days 60-90 days

30-60 days 0-30 days(%)

Victoria − Arrears

Source: Fitch

20,000

30,000

40,000

50,000

60,000

70,000

80,000

2004 2006 2008 2010 2012

Hume City Inner MelbourneMelton-Wyndham Moreland CityMornington Peninsula Eastern Middle MelbourneEast Middle Melbourne VIC


Victoria − Historical Average Taxable Income of Selected Regions

(AUD)

0.0

0.5

1.0

1.5

2.0

2.5

3.0


Hume City Inner Melbourne Melbourne

Melton-Wyndham Moreland City Northern Middle Melbourne

Eastern Middle Melbourne Goulburn & Ovens-Murray(%)

Victoria − Historical 30+ Day Arrears of Selected Regions

Source: Fitch

Index


Unemployment Rates Borrowers north west of Melbourne are more sensitive than the rest of

the state to interest-rate movements, because these regions are

characterised by above-average unemployment rates and lower-than-

average incomes.

Hume City and Melton-Wyndham have not – in contrast with West and

South West Sydney − experienced the same improvement in the 30+ days

delinquency rate, due probably to the worsening unemployment over the

12 months to March 2014. North Western Melbourne had an

unemployment rate of 7.0%-8.0% over this period.

The best-performing regions are still located in the inner city − as was the

case at end-September 2013 – with on average six loans out of 1,000

being delinquent by more than 30 days , compared with five at end-March

2013. However, none of these regions was among the 10 best-performing

regions in Australia for the first time since this report was published.

Fitch believes that delinquency rates are likely to increase in outer regions

affected by rising unemployment rates.

4Q13 North Western Melbourne 7.1 Inner Melbourne 5.6 Outer Western Melbourne 6.6 Inner Eastern Melbourne 5.9 Goulburn-Ovens-Murray 4.9 North Eastern Melbourne 5.7 VIC 5.8


House Prices

1Q14 Hume City 1.04 Inner Melbourne 1.02 Melton-Wyndham 1.11 Moreland City 1.04 Northern Middle Melbourne 1.06 Eastern Middle Melbourne 1.10 Goulburn & Ovens-Murray 1.06 Northern Outer Melbourne 1.10 Melbourne 1.06


0.0

2.0

4.0

6.0

8.0

10.0


North Western Melbourne Inner Melbourne Outer Western Melbourne

Inner Melbourne Goulburn-Ovens-Murray VIC(%)

Victoria − Historical Unemployment Rate of Selected Regions

Source: Fitch, LMIP, ABS

0.9

1.0

1.1

1.2


Hume City Inner Melbourne Melton-Wyndham

Moreland City Northern Middle Melbourne Eastern Middle Melbourne

Goulburn & Ovens-Murray Melbourne(%)

Victoria − Historical Dwelling Prices of Selected Regions


Index


Queensland

Queensland is the third-largest state by securitised mortgage balance. Fitch has analysed information on

about 188,000 mortgages, for an equivalent amount of AUD37bn. The average delinquency ratio in

Queensland was 1.42% at end-March 2014, down 21bp from 1.37% in end-September 2013. Queensland

is the worst-performing state in Australia in mortgage performance, although the current delinquency

levels are far below the record high of 2% at 31 March 2011. Delinquency rates in Brisbane are relatively

stable and low, at 1.21%, below the national and state average.

Historically, the four regions located south of Brisbane (Ipswich, Logan, Gold Coast East, and Gold Coast

West) have been among the worst-performing regions in Australia since end-March 2011. However, as of

March 2014, Ipswich and the Gold Coast East are no longer among the worst-performing regions.

Arrears in Ipswich have stabilised significantly since March 2012, indicating that the effects of flooding

experienced in early 2011 may have faded completely.

Logan City and Caboolture, an urban area 45km north of Brisbane, were the worst-performing regions in

Queensland at end-March 2014 with a delinquency rate of 2.05% and 2.03%, respectively. Delinquencies

in these two outer regions share similar trends, indicating that they are affected by similar socio-

economic factors.

The city of Caboolture, among the 20 worst-performing postcodes in Australia, is located in this area.

Ipswich City

1.55

West

Gold

Coast

1.82

Darling Downs

& West

Moreton

1.65

Logan

2.05

Northwest

Inner

0.77

Inner Brisbane

0.61

Redland

1.27

East

Gold

Coast

1.64

South Inner

0.54

SE Outer

0.77

Sunshine

1.63

Caboolture

2.03

Pine

1.17

Northwest

1.04

Source: ABS, Fitch

Brisbane – 30+ Day Delinquencies

0.00% To 0.45%

0.45% To 0.90%

0.90% To 1.35%

1.35% To 1.80%

1.80% To 2.25%

>2.25%

0.0

0.5

1.0

1.5

2.0

2.5

3.0


90+ days 60-90 days

30-60 days 0-30 days(%)

Queensland − Arrears

Source: Fitch

20,000

30,000

40,000

50,000

60,000

70,000

2004 2006 2008 2010 2012

Inner Brisbane

Northwest Inner Brisbane

Southeast Inner Brisbane

Caboolture Shire

Logan City (incl_ Beaudesert Shire)

Logan City

QLD

Queensland − Historical Average Taxable Income of Selected Regions


(AUD)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5


Inner Brisbane Northwest Inner Brisbane Southeast Inner Brisbane

Caboolture Shire Logan City (incl_ Beaudesert Shire) Mackay

Brisbane(%)

Queensland − Historical 30+ Day Arrears of Selected Regions

Source: Fitch

Index


Unemployment Rates Logan City, about 50km south of Brisbane, has had a considerable

increase in delinquency rates beginning in November 2010. Kingston and

Jimboomba, which are among the 20 worst-performing postcodes in

Australia, are located in this area.

Gold Coast East was the region that improved the most in the six months

to March 2014, as arrears have declined by 36bp to 1.64% (from 2.00%).

The recent stabilisation in the housing market and economy has

benefited clearance of foreclosed properties, reducing 90+ days arrears

which decreased to 0.62% at end-March 2014 from 0.81% at end-

September 2013 ( and 1.22% at end-March 2013).

Gold Coast East was the worst-performing region in Queensland from

March 2008 to March 2013, as declining house prices have had an impact

on the credit profile of leveraged buyers attracted to the region by

expectations of short-term property gains and high rental yields.

Sunshine Coast shared the same trend in delinquency rates as Gold Coast

East over the 18 months to end-March 2013.

Fitch believes that tourism-based coastal regions, like the Sunshine Coast

and Gold Coast East, are subject to a higher level of volatility than the rest

of Queensland in the long term. This is because their economies are less

diversified than the rest of the state, something that is likely to have an

impact on house prices and mortgage performance.

Mackay has instead shown a worrying upward trend, with delinquencies

increasing to 1.86% in March 2014 from 1.42% at end-September 2013 –

which contrasts with the stable employment.

4Q13 Brisbane City Inner Ring 3.6 North Brisbane Balance 6.9 North Brisbane 5.5 South and East Brisbane 5.0 QLD 5.5


House Prices

1Q14 Inner Brisbane 1.04 Northwest Inner Brisbane 1.05 Southeast Inner Brisbane 1.04 Caboolture Shire 0.98 Logan City 0.97 Mackay 1.08 Brisbane 1.00


0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0


Brisbane City Inner Ring Brisbane City Inner Ring North Brisbane

South and East Brisbane QLD(%)

Queensland − Historical Unemployment Rate of Selected Regions


0.9

1.0

1.1

1.2


Inner Brisbane Northwest Inner Brisbane Southeast Inner Brisbane

Caboolture Shire Logan City (incl_ Beaudesert Shire) Mackay

Brisbane

Queensland − Historical Dwelling Prices of Selected Regions

Source: Fitch, RP Data / RismarkMar 2011 = 1

(%)

Index


Western Australia

Fitch’s analysis covers about 84,000 mortgages across Western Australia for an equivalent amount of

AUD18bn. The 30+ day arrears rate in Western Australia was 1.31% at end-March 2014, with a 14bp

worsening in line with the national average (11bp). The 30-59 days arrears have been volatile due to

seasonality, but since 31 March 2011 they have shown an overall stable trend.

The 30-59 days and 90+ days arrears were 0.54% and 0.56%, respectively, at end-March 2014, in line with

March 2013, and the average over the last four years. The 90+ days arrears are still below the peak of

0.82% at end-March 2011, due in large part to the significant housing appreciation experienced since

then.

Western Australia (excluding Perth and South West WA) was the worst-performing region, with a

delinquency rate of 2.08%. Delinquency rates in this region were mainly driven by a stagnating housing

market since December 2012, but especially the significant increase in unemployment rate.

Kalgoorlie, a mining town in the outback of Western Australia, was also located in this region. In

September 2013, other towns located in this region (Albany and Esperance) were also among the worst-

performing postcodes.

Source: ABS, Fitch

Perth – 30+ Day Delinquencies

Western Australia

(excl. Perth & South West)

2.08

East Metro Perth

1.26Cental Metro

Perth

0.37

South East Metro

1.23

South West

Metro Perth

1.41

North Metro Perth

1.23

1.58South West WA

0.00% To 0.45%

0.45% To 0.90%

0.90% To 1.35%

1.35% To 1.80%

1.80% To 2.25%

>2.25%

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5


90+ days 60-90 days

30-60 days 0-30 days(%)

Western Australia − Arrears

Source: Fitch

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

100,000

2004 2006 2008 2010 2012

Central Perth East PerthNorth Perth South East PerthSouth West Perth South West WAWA WA Regional

Western Australia − Historical Average Taxable Income of Selected Regions


(AUD)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5


Central Metropolitan Perth East Metropolitan Perth North Metropolitan Perth

South East Metropolitan Perth South West Metropolitan Perth South West WA

WA WA Regional(%)

Western Australia − Historical 30+ Day Arrears of Selected Regions

Source: Fitch

Index


Unemployment Rates South West WA arrears stabilised at 1.54% after showing a remarkable

improvement since 31 March 2011, when it was the second worst-

performing region in Australia, with a 30+ day delinquency rate at almost

double the current level (2.93%).

The local housing market in this region has improved over the two years

to March 2014, recording a 21% increase in dwelling prices. This has

significantly helped to reduce 90+days arrears.

Fitch expects mortgage performance in this region to remain affected by

movements in house prices, as it has traditionally been a location for

second-homes, investment properties and housing speculation.

Casuarina, historically one of the worst-performing suburbs in Australia,

was among the 20 worst-performing postcodes by number of borrowers

in arrears, with 20 borrowers out of 1,000.

4Q13 Central Metro Perth 2.9 East Metro Perth 3.7 North Metro Perth 2.8 South East Metro Perth 3.0 South West Metro Perth 4.8 South West WA 5.4 WA (excl. Perth) 6.7

WA 4.1


House Prices

1Q14 Central Metropolitan Perth 1.09 East Metropolitan Perth 1.15 North Metropolitan Perth 1.12 South East Metro Perth 1.16 South West Metro Perth 1.10 South West WA 1.21 WA (excl. Perth) 1.06 Perth 1.07


0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0




WA WA Regional(%)

Western Australia − Historical Unemployment Rate of Selected Regions


0.8

0.9

1.0

1.1

1.2

1.3




Perth WA Regional

Western Australia − Historical Dwelling Prices of Selected Regions


(%)

Index


South Australia

Fitch has analysed about 64,000 mortgages in South Australia for an amount equivalent to AUD10bn.

Delinquencies in South Australia were in line with the national average at 1.38%, at end-March 2013,

12bp up from the 30 September 2013 level (1.26%) despite the above-average unemployment rate and

low appreciation in house prices.

The unemployment rate in South Australia has increased slightly since March 2013, and it is currently

above the national average. The housing market in South Australia has not shown a significant

improvement in the three years to March-2014, in contrast with the rest of Australia.

Northern Adelaide had the highest delinquency rate in South Australia (1.75%), reflecting the above-

average unemployment rate, the average lower income per capita, and a stagnant housing market.

Source: ABS, Fitch

Adelaide – 30+ Day Delinquencies

South Australia

(excl. Adelaide)

1.59

Northern

Adelaide

1.75

Southern

Adelaide

1.18

Eastern

Adelaide

1.03

Western

Adelaide

1.15

0.00% To 0.45%

0.45% To 0.90%

0.90% To 1.35%

1.35% To 1.80%

1.80% To 2.25%

>2.25%

0.0

0.5

1.0

1.5

2.0

2.5

3.0


90+ days 60-90 days

30-60 days 0-30 days(%)

South Australia − Arrears

Source: Fitch

20,000

30,000

40,000

50,000

60,000

70,000

2004 2006 2008 2010 2012

Eastern Adelaide Northern Adelaide

SA Regional Southern Adelaide

Western Adelaide SA

South Australia − Historical Average Taxable Income of Selected Regions


(AUD)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5


Eastern Adelaide Northern Adelaide SA Regional

Southern Adelaide Western Adelaide SA(%)

South Australia − Historical 30+ Day Arrears of Selected Regions

Source: Fitch

Index


Unemployment Rates

4Q13 Eastern Adelaide 4.1 Northern Adelaide 9.1 SA Regional 5.4 Southern Adelaide 7.6 Western Adelaide 6.3 SA 6.6


House Prices

1Q14 Eastern Adelaide 1.00 Northern Adelaide 0.98 SA Regional 0.99 Southern Adelaide 1.00 Western Adelaide 1.01 Adelaide 0.99


0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0



Southern Adelaide Western Adelaide SA(%)

South Australia − Historical Unemployment Rate of Selected Regions


0.9

1.0

1.1



Southern Adelaide Western Adelaide Adelaide

South Australia − Historical Dwelling Prices of Selected Regions


(%)

Index


The Postcode Report and Methodology

This is Fitch’s 12th report covering the performance of Australian mortgages by postcode; the first was in

November 2007. The study relies on data from home loans (conforming and non-conforming) that have

been securitised in the Australian market. The data includes mortgages securitised in either term or

internal repo-eligible transactions. The study included about 820,000 loans at 31 March 2014 (1,028,000

at 30 September 2013) with a total outstanding balance of over AUD160bn (AUD203bn at 30 September

2013). The volume of securitised mortgages in the study represents about 12% by value of the total

housing loan stock in Australia. As such, it provides a good proxy for the performance of the Australian

residential housing finance sector.

Fitch has divided Australian mortgage performance by geography. The agency has done this by placing

an emphasis on the postcode in which the security property is located. In this manner, Fitch is able to

analyse missed payments on residential mortgages in Australia at varying levels of granularity, including

by state, city, region, and postcode.

The location of the property might be different than the residency of the borrower and the business

focus of the lender, as not all of the mortgages are owner occupied. Therefore, for small geographical

areas such as postcodes, the study provides more information on the performance of the secured

property market, rather than the creditworthiness of the residents in that particular area, or the

performance of a specific lender’s portfolio. The location of the property might not always reveal the

credit profile of the obligor, but it remains a discriminating factor in performance.

Fitch displays statistics both by postcode and by region to compare different geographical areas across

Australia. The agency has segmented Australia into proportionate and homogenous areas since

September 2010. In identifying and grouping statistical subdivisions, Fitch has reached statistical

significance and geographical divergence at the same time.

Fitch has identified 76 regions. In metropolitan areas such as Sydney, Melbourne, Brisbane, Adelaide,

and Perth, the information is displayed for Statistical Subdivisions (SSD), as defined by the ABS. Other

SSDs have been grouped together in larger divisions (e.g. Statistical Divisions as defined by the ABS). For

more information, see Australian Mortgage Delinquency by Postcode – 31 March 2014 Data.

The information is also represented visually using maps. While the postcode maps show the location of

the 20 worst-performing postcodes, the regional maps show those geographical areas currently

experiencing higher- or lower-than-average 30+ days arrears by Australian dollar amount. Information by

number of loans in arrears is provided in tables, but is not displayed in geographical maps.

The colour of a specific region indicates whether it is under- or over-performing the national average.

Arrears are grouped into quintile in relation to the national average at a particular reporting date. For

example, Australian securitised mortgage arrears amounted to 1.35% at end-March 2014, 30+ days

arrears are displayed in three quintiles above and three quintiles below such value. In each map, Fitch also

displays the level of arrears as a numeric value for each region. Furthermore, the maps show whether

performance has deteriorated or improved from the last reporting date (in this case, 30 September 2013).

This study exclusively analyses performance among the larger postcodes in Australia. Postcodes with less

than AUD100m of the total securitised mortgage balance are excluded from the analysis, as Fitch

believes that the sample is not of sufficient size to provide useful and reliable information. Moreover, only

postcodes with more than 500 securitised loans and more than 10 delinquent loans are included among

the analysis of worst-performing loans. In relatively small postcodes, a few very large loans falling into

arrears could exaggerate the real deterioration in such areas.


Index


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AUSTRALIA Australian Mortgage Delinquency by Postcode 31 ...Mortgage... · Vickie Brumwell Investor...

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