Coast investors falling behind with mortgages

In a sign of weakness in the holiday home market, the rate of mortgage arrears has continued to rise in beachside areas in NSW and Queensland, according to figures to be published today by Fitch Ratings.

The number of people falling behind on repayments rose in several suburbs around the Gold Coast and the report says there is "no sign of stabilisation" in the area.

Nelson Bay, north of Sydney, had Australia's highest share of mortgage delinquencies, at 7.8 per cent of loans by value.

The figures, collected in March, also showed south-west Sydney suburbs including Hoxton Park and Green Valley had large numbers of people failing to keep up with repayments. Fitch said these households would benefit from the cuts to interest rates in May and June.

The weakness in tourism areas highlights that local economies are feeling the strain as more Australians exploit the high dollar and take their holidays overseas.

In NSW, central coast house prices are 6.9 per cent below their peaks, while Byron Bay property prices are down 13.8 per cent.

"All these markets really have quite a similar performance in the sense that we've seen some material declines in values," Tim Lawless, the director of research at RP Data, said.

The weakness of sharemarkets had also choked off housing demand from Australian retirees, many of whom have deferred their retirement, he said. "All those people that were aspiring to put their feet up at the Gold Coast and retire, a lot of them are rethinking because they've seen a halving of their share portfolio and their retirement savings aren't what they used to be."

The weakness in coastal regions suggests the poor performance of tourism is hurting the value of holiday home investments.

On the Gold Coast, the Fitch analyst James Zanesi said many of the borrowers who were falling behind in their repayments were investors, rather than owner-occupiers.

"A large number of the houses in those areas are investment homes or second homes," he said. "When house prices are going down you might have a borrower who is trying to hold onto a home because they don't want to make a loss."

Most regions in Western Australia outperformed the rest of the country.