Foreclosures on the rise in Australia

As coronavirus continues to strangle the Australian economy, an estimated 1.5 million owner-occupied households are under extreme mortgage stress. Experts tip a massive wave of foreclosures, with urban areas in NSW, Victoria and Queensland among the worst hit. DGI Founder and CEO Dominique Grubisa explains what it means for the distressed property sector.

Australia is in the midst of the most severe economic crisis in several decades. The coronavirus has cost a million Australians their jobs, forced countless families to chew through their savings, and devastated entire sectors.

We’re now seeing the next stage of the crisis with levels of mortgage stress rising to uncharted levels, and with thousands of mortgage holders likely to be forced to sell over the coming months.

Figures from the Australian Banking Association show some 800,000 Australian homeowners have deferred mortgage repayments during the COVID period, accounting for $260 billion worth of loans. Banks have recently extended the mortgage deferment period until the end of the year, although the outstanding money is continuing to attract interest, putting loan holders into deeper and deeper debt.

→ Discover The Property Hot Spots In Australia Right Now

The pressure homeowners are under has recently been highlighted by a study by research business Digital Finance Analytics. Surveys conducted by DFA showed that 39 percent of owner-occupied households with a mortgage were under stress, accounting for some 1.47 million loans. Mortgage stress is significant as it often comes before a household defaulting on mortgage repayments and, eventually, foreclosure and eviction.

The new data is of major interest to the distressed property sector. Professionals in this field look for situations where owners are being forced to sell their properties, often for prices well below market value. Rather than exploiting vulnerable owners, reputable distressed property professionals work with them, helping them to avoid the indignity of a bank foreclosure, and sometimes even sharing the profits.

A Crash Course in Pre-foreclosure Sale and Short Sales

27 Jul 2021

The DFA data points to major potential for distressed property purchases in areas in every state and every capital city. Several of the areas with the highest levels of distress are in Victoria, with Berwick and Harkaway topping the list. In NSW, the most distressed areas are Mount Annan, Narellan and Narellan Vale, while in Western Australia it’s Clarkson, Ridgewood. Tamala Park. For Tasmania, the most distressed areas are Launceston and Newstead, while for South Australia it’s Paralowie and Salisbury, and in Queensland Aspley and Geebung and Zillmere.

15 areas with the highest mortgage stress by postcode

• 3806 Berwick, Harkaway
• 6030 Clarkson, Ridgewood. Tamala Park
• 3350 Ballarat
• 3030 Derimut, Point Cook, Weribee
• 3037 Delahey, Hillside, Sydnenham
• 3810 Pakenham, Pakenham Upper
• 2567 Mount Annan, Narellan, Narellan Vale
• 3977 Cranbourne
• 7250 Launceston, Newstead
• 5108 Paralowie, Salisbury
• 4034 Aspley, Geebung, Zillmere
• 3064 Craigleburn, Donnybrook, Roxburgh
• 3029 Hoppers Crossing, Tarnett
• 4305 Ipswich
• 2770 Lethbridge Park, Minchinbury

Source: Digital Finance Analytics

How to find – and buy – properties on the verge of foreclosure

The secret to making a profit from the distressed property sector is to buy a property under market value, to carry out any necessary improvements, and to sell for a profit. But once you identify a likely area for distressed sales how do you zoom down to actual sales. Some techniques include monitoring legal and court notices, conducting targeted letterbox drops, and building solid relationships with local real estate agents. While some distressed property flippers start out alone, others prefer the solid grounding formal training provides. Students studying the DG Institute’s Real Estate Rescue course and graduates receive a regularly updated list of distressed properties to help them kickstart their property careers.

Once you have located one or several prospects, a successful purchase will come down to establishing a rapport with the owner, listening, building trust, and coming to an agreement that works for both of you. The most impressive careers in this area are built by professionals who have reputations for being fair and reasonable as well as financially astute.

The outlook

While the current levels of mortgage distress are high, experts believe this is just the tip of the iceberg. The scheduled end of the JobKeeper scheme in September is expected to fuel further economic stress, leading to more mortgage defaults and foreclosures. This represents a golden opportunity for those house flipping professionals willing to do the hard yards and find suitable properties.