Mortgage stress warning for FIFO property buyers

With the number of new jobs in the Western Australian mining sector starting to surge on the back of massive new investment in the resources sector, fly-in, fly-out (FIFO) workers in the state have been warned to not make the same mistakes in the property market as occurred during the last mining boom.

Investwise Managing Director Daniel McQuillan said 2020 was shaping up to be one of the best years for employment growth in the WA mining sector following strong employment growth last financial year.

“It is significant the average number of men and women employed in the WA mining sector jumped by about 12,000 people for the last financial year on the back of a $30 billion increase in mineral and petroleum sales compared to the previous year,” he said.

“With major new resources projects set to start construction in 2020, employment in the WA mining sector is set to surge even further, creating significant employment opportunities for highly paid FIFO workers.”

Mr McQuillan urged FIFO workers to not make the same mistakes as those made in the last mining boom in the state, which ended in many of them losing their home as well as investment properties.

“Poor financial planning and the wrong choice of properties contributed to many FIFO workers in WA ending up in mortgage stress following the end of the last mining boom,” he said.

“This is underlined by figures from the Reserve Bank of Australia (RBA), which show the housing loan arrears rate in WA increasing from being a little above the rest of the country to more in 2015, to more than double the national rate at 1.7 per cent in July 2019.

“RBA figures also show loans to investors in WA have performed worse compared to owner-occupiers. For investors, the increase in arrears has been about half a percentage point larger than for loans to owner-occupiers due to weak rents and riskier borrowing characteristics such as higher debt-to-income ratios.

“It is tragic many FIFO workers in WA have been forced to sell property at a loss during the last number of years because they simply financially overstretched themselves during the last mining boom and had no plan in place to take them through any financial downturn.”

Mr McQuillan said buying property was about holding property long term, and FIFO workers who had managed to hold onto their properties during the downturn since 2015 would reap the financial rewards with the expected recovery in the state economy.

“To assist FIFO workers from repeating the same mistakes, Investwise is working with mining companies, through The FIFO Support Project to help educate their FIFO workers on putting in place a financial plan, so they do not squander the opportunities of future mining booms but rather help create long-term personal wealth for themselves,” he said.

“We have developed The Wise Investor Foundation Program, which is a 12-month educational program for employees in the mining sector.

“Since its launch, it has being warmly welcomed by mining companies, as it helps give employees a positive outlook on their financial future making them more productive employees.”