Many properties in mining regions are now worth far less than the purchase price.

 

The mining decline is hitting property owners in Australia’s mining regions hard.

Most of the affected areas are in Queensland. While owners in Emerald, Clermont, Middlemount, Dysart, Moranbah, Surat Basin, Bowen Basin and Mt Isa have been the worst affected, those in large coastal centres such as Gladstone and Mackay are also feeling the pain.

And the problem isn’t restricted to Australia’s Sunshine State, with the Broken Hill region of New South Wales, South Australia’s Roxby Downs and Western Australia’s Pilbara region also feeling the effects.

To give you an idea of how bad things have become, the median house price in Moranbah has dropped from $750,000 and 161 sales in 2012 to just $160,000 and 74 sales in 2016.

Rental returns have also plummeted, leaving property owners unable to make repayments on mortgages that are well above the property’s value.

In short, property owners in these regions have reached a dead end.

What can you do?

If you’re a home owner or investor in one of these areas, you may have tried propping up the mortgage with your own money. Unfortunately, you can only do that for so long before you run out of savings. From there you may have looked at interest-only payments, or even a payment holiday from the bank. But unless you can keep paying the mortgage until mining starts up again (and who knows when that will happen), you’ll need to deal with your property—and your bank.

Fortunately, that’s something we can help you with.

Here’s what we can do

Here at Cactus Consulting we regularly help clients facing the same predicament. They come to us thinking bankruptcy is their only option. But on their behalf, we negotiate a settlement arrangement with their bank to give them a better outcome and help them avoid bankruptcy.

 

Here’s what we managed to do for two of our clients. Could we help you too?

Client success story #1

When Denise* came to us, her Moranbah home and rental property were both worth less than half of what she paid for them.

She purchased the two properties in or before 2012 for $985,000 all up, and sold them in 2015 for around $400,000. With both mortgages adding up to $940,000, even after the sales she still owed the bank $630,000.

As she was still employed in her mining job, bankruptcy would have made Denise liable to pay around $20,000 in income contributions over three years. So we offered the bank a similar amount, payable by instalments over two years.

The bank accepted our offer, knowing it was a greater, more certain, return that would avoid the costs and risks of bankruptcy.

As for Denise, she avoided bankruptcy and regained control of her debts. And her $630,000 debt was reduced to just $20,000, which she could then pay in affordable instalments over two years. 

Client success story #2

Colin* was in a similar position to Denise. He’d bought his two Moranbah properties in or before 2012 for more than $1m, and could no longer afford the mortgage payments.

He handed his keys in to the bank, which then sold the properties for around $160,000 each. Unfortunately, that meant Colin still owed the bank more than $850,000.

Bankruptcy would have made Colin liable for $55,000 in income contributions. Fortunately, he had about $32,000 in his bank account after selling the BHP shares he received through an employee share scheme.

On Colin’s behalf, we negotiated with the bank and offered them $57,000—the $32,000 he already had, plus a further $25,000 payable by instalments over two years.

Colin avoided bankruptcy, settled his $850,000 debt for $57,000, and regained control of not only his financial affairs, but also his life.

 

Is your property worth less than the mortgage owing on it? Are you struggling to keep up with the mortgage payments? Are you contemplating declaring bankruptcy? Then get in touch with us today. We’ll talk to your bank on your behalf and see if we can negotiate a better option for you.

 

* Not their real names

 

 

Posted on 28-03-17 in Money management and bankruptcy.