According to the September 2016 quarter Pain & Gain report, produced by CoreLogic, on a national level, 9.4 per cent of resold dwellings fetched a price lower than the previous purchase price – up from 8.1 per cent the year before.
By proportion, loss-making resales reached a recent low point over the three months to November 2016 when 7.9 per cent of all resales made a loss. This continues the trend towards more loss-making resales across the Australian housing market.
In monetary value, the quarter saw $477.9 million in losses from resales, compared to $17 billion in realised profits. The average loss was recorded at $71,529 while the average profit was $262,672.
Nationally, 8.0 per cent of houses and 12.7 per cent of units were resold at a loss over the September 2016 quarter.
Darwin loss on resale pushes past 30 per cent
In a state-by-state analysis, CoreLogic found that regional homes resales in coastal and lifestyle markets continued to trend lower, while losses climbed most in the regions linked to the resources sector, which have faced a downturn in recent years.
In Darwin, the proportion of houses that sold for a loss rose to nearly a third, with 30.7 per cent of resales recording losses, compared to 17.4 per cent in the same quarter the year before.
Likewise, in Perth, losses nearly doubled to 19.6 per cent, up from 10.8 per cent the year before.
“The recent rebound in commodity prices is not yet being reflected in higher rates of profit makes resales. In fact, if anything we are seeing a greater number of owners reselling their properties in these locations at a price lower than that which they purchased them for...” the report said.
“In each region except Hunter Valley (excluding Newcastle), the proportion of resales at a loss is either at a record high or has been over the most recent two months… Many of these regions continue to experience soft labour markets, low housing demand and high levels of housing stock available for sale. It is also apparent that plenty of home owners are willing to sell however, there is a lack of willing buyers.
“Until such time as resources investment lifts or these areas can find ways to diversify their economies we would expect ongoing weakness and heightened instances of home owners selling for less than the original purchase price.”
Just two of the capital cities recorded lower losses in the September 2016 quarter – Hobart and Adelaide.
However, Sydney again reported the lowest loss on resale, with just 2.3 per cent selling for less than they were bought (but up from 1.7 per cent the year before), with properties in this quarter earning an overall profit of $6.22 billion.
Houses vs units
Notably, Sydney was the only major region nationally in which loss on houses was greater than loss on units in the quarter (2.5 per cent compared to 1.9 per cent).
Adelaide was one of only three capital cities to record a lower loss rate in the quarter (at 7.2 per cent), while Melbourne now has the lowest proportion of loss-making house resales of all capital cities at 2.1 per cent.
However, units being sold at a loss in Melbourne and Brisbane were more than double than those of houses, while the figure was close to double in Perth.
Overall, while both houses and units have seen the proportion of loss-making resales trend higher nationally over the past year, units have trended higher at a more rapid pace than units. According to CoreLogic, since record-keeping began in 1994, units have never recorded a lower proportion of loss-making resales than houses.
“In most instances, houses virtually always show a lower proportion of loss-making resales than units. The likely reason for this is that the value of a house is largely derived from the land and its location. Also, typically houses have increased in value at a faster rate than units,” CoreLogic’s head of research Cameron Kusher said.
Mr Kusher said the homes that resold at a loss had a typical length of ownership of 6.1 years for houses and 6.5 years for units. Across all gross profit resales realised, the typical length of ownership was recorded at 9.1 years for houses and 7.6 years for units.
“These latest results highlight that ownership of property, whether for investment or owner-occupier purposes, should be seen as a long-term investment,” he said.
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Annie Kane is the editor of The Adviser and Mortgage Business.
As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts.