Property prices in WA have fallen while unemployment and cost of living expenses are high. It’s a perfect storm for those who invested at the height of the mining boom. Courtesy: ABC/7:30
FAMILIES in Western Australia are at breaking point, plagued with mounting debts they can’t pay off, as they face the reality of a collapsing economy.
As properties decrease significantly in value and unemployment rates rise, many are now struggling to find jobs to make ends meet.
Could this be the future of Melbourne and Sydney? Western Australia was once a booming product resources hub, with thousands moving to areas around Perth from interstate and overseas to work.
It had one of the strongest economies in the nation with housing prices on par and even higher than Sydney and Melbourne in the early 2000s.
Fastforward to 2017 and WA now has the weakest economy in the country, with a high unemployment rate and a collapsing property market.
Perth property valuer Gavin Hegney told ABC’s 7.30 program homes at the top end of Perth and on the urban fringe were decreasing in value and lessons could be learned from WA’s collapse.
“Perth was booming, booming along and the east coast was on its knees,” he said.
“It’s the complete reverse today.”
Mr Hegney told ABC WA had a strong economy in 2006 and 2007 but today it was a completely different story. And he warned it would be a risky move for the government to change laws around negative gearing and capital gains tax.
“You probably want to be planning policies now for when the market comes off, and it will come off. What policies then should we implement to soften the blow of the market?” he said.
“That’s what we should be thinking today, not turning off the top of our boom.”
Brad Wright was a project engineer working around WA, earning about $250,000 a year.
Now he works as a security guard part-time while he tries to dig himself out of a dire financial position.
“People have had their incomes slashed to 10, 20 per cent of what they were normally being paid and they have to meet enormous payments,” he told 7.30.
He had two investment properties and a home in a luxurious suburb of Perth during the boom.
He borrowed almost $1 million and said waiting for his loan approval was “as easy as buying an ice cream”.
He’s now sold his apartments and is focused on saving the family home while paying back $90,000 of debt.
He said the stress of trying to deal with the bank and find a solution to his troubles pushed him almost to the point of suicide.
“It’s been really tough,” he told 7.30.
He said he didn’t know what he would do if he had to resort to selling the family home.
“We will basically be kicked out on to the street with just the clothes we’re wearing and substantial debts,” he said.
Lifeline financial counsellor Jenny Cecil said they were servicing a new group of clients — those struggling as a result of the economy collapsing. Many had been high income earners.
She said a lot of clients were now using credit cards to maintain mortgage payments, electricity bills and council rates, making their financial positions even harder.
During the product resources boom in WA incomes doubled, and Bankwest chief economist Alan Langford told 7.30 households were not getting the income growth today they were during the boom.
It’s a very different story in Perth compared to Melbourne and Sydney.
“They say in the top end of Perth on a quiet day you can hear the property values falling,” Mr Hegney said.
“And property values at the top end of the market have probably dropped 30 per cent from where they were at the peak of the market in 2009.”
In Mandurah, about an hour and a half from Perth, a home five minutes from the shopping centre and three minutes from the beach can be purchased for just $399,000.
There has been an 18 per cent drop in the price of properties in Mandurah in the last 10 years.
What used to be an issue of an undersupply of housing in WA is now an issue of oversupply and both housing prices and rental prices have dropped dramatically.