negative equity hits thousands in wa

http://macrobusiness.com.au/2011/04/negative-equity-hits-thousands-of-wa-homeowners/


Tens of thousands of Perth homeowners who bought property at the top of the boom before the global financial crisis are facing big losses as the market goes through its worst period in almost two decades.

Special analysis of median house and land prices across the city reveals that people who bought at the peak of the market in late 2007 and early 2008 hoping to see their investment grow now hold ?negative equity?.

Once inflation is taken into account, a person who bought a median-priced block of land in Perth three years ago is at least $48,000 worse off, while someone who bought a median-priced house is down by almost $25,000.

The median price of a house sold in Perth grew 162 per cent between early 2002 and the end of 2010, while the median price of a residential block of land rose 182 per cent.

But all that growth was up to the peak of the market in late 2007.

Since then, the median price of a house has lifted just 3.2 per cent to $480,000, while for land it has fallen 9.4 per cent to $240,000.

However, this does not take into account movements in the inflation rate.

Between 2007 and 2010, overall prices in Perth have risen 8.7 per cent.

If house prices had kept pace with inflation, the median price would now be $505,000.

For someone who borrowed all the value of a median-priced home in Perth, that translates into a loss so far of $25,000 coupled with interest repayments of $75,000 over the past three years.

It is worse for people who have bought land.

If residential land had kept pace with inflation, an average block in Perth would now cost $288,000. That translates into a loss of $48,000, given the current median price.

It?s the worst performance by the Perth market over three years since the early 1990s when median house prices fell.