Queensland property portfolios more profitable than New South Wales

Queensland property portfolios are intrinsically more profitable on average compared with New South Wales, according to the latest Fujitsu/JPMorgan Australian Mortgage Industry Report (Volume 4).

The report, which was published today, also found that the most profitable customers, Australia-wide, are becoming more profitable for lenders and brokers, while the reverse is true of unprofitable customers.

Martin North, Managing Consulting Director, Fujitsu Australia and New Zealand said, “The growing gap between profitable and unprofitable customers is a result of higher fees offsetting interest margin reductions and higher churn in unprofitable customer groups.”

According to the Australian Mortgage Industry Report, New South Wales contains the most profitable and unprofitable customers in Australia, compared to lesser extremes of profitability/unprofitability in Queensland. This can be explained in part by the fact that the average loan size in New South Wales is larger, reflecting higher house prices in the state.

In addition, Loan-to-Value-Ratios (LVRs) are significantly higher in New South Wales than Queensland. The average LVR in New South Wales has risen from 51 per cent in 2003 to 78 per cent in 2006, compared to Queensland, where the average LVR has risen from 46 per cent in 2003 to 65 per cent in 2006 – a jump of 19 percent, compared to 27 per cent in New South Wales.

Martin North said, “The combination of high LVRs, rising interest rates, stalling house prices in some sectors and a doubling of repossessions over the past two years in New South Wales indicates there are inherent risks in New South Wales property portfolios.”