Where homeowners are selling properties at a loss,
Australian home sellers had a higher likelihood of making a profit in the June quarter compared to three months earlier.
However, in areas of high-density development, owners risked selling their properties at a loss.
According to CoreLogic’s Pain and Gain Report for the June quarter, 94.5 percent of property resales traded at a profit.
This figure slightly increased from 94.4 percent during the three months leading up to March.
The report was released on Wednesday, highlighting the trends in property resale profitability.
Overall, while many sellers benefited, certain regions still faced challenges in achieving profitable sales.
In certain apartment-heavy neighborhoods, at least one in five sellers experienced a loss during the June quarter.
This trend occurred because a high supply of available homes provided buyers with more choices.
CoreLogic’s head of Australian research, Eliza Owen, noted the modest increase in profitability but warned it could peak soon.
She explained that the property market may soften as spring progresses, impacting profitability.
“There’s significantly more supply on the market this spring compared to last year,” she stated.
Additionally, it surpasses the historical five-year average in terms of availability.
On the buyer side, there are several headwinds, including low saving rates and a higher cost of living.
Furthermore, high interest rates and low consumer sentiment contribute to these challenges.
Sellers were more likely to profit from selling a house than a unit.
Among house vendors, 97.2 percent made a gain, while only 89.4 percent of unit vendors experienced the same.
Where property owners are selling at a loss
| LGA | Loss-making sales, % | Median loss, $ |
|---|---|---|
| Yarra | 17.5% | 50,000 |
| Vincent | 13.3% | 33,000 |
| Victoria Park | 9.0% | 30,000 |
| Sydney | ||
| Subiaco | 10.9% | 56,400 |
| Strathfield | 19.2% | 48,112 |
| Stonnington | 25.8% | 49,000 |
| Ryde | 21.5% | 54,000 |
| Port Phillip | 21.6% | 37,900 |
| Perth | ||
| Perth | 33.7% | 43,500 |
| Parramatta | 25.9% | 50,000 |
| Melbourne | ||
| Melbourne | 39.0% | 64,000 |
| Cumberland | 14.2% | 35,500 |
| Burwood | 17.9% | 45,500 |
| Boroondara | 18.1% | 50,250 |
| Belmont | 13.8% | 44,500 |
The likelihood of making gains varied by city across Australia.
Outside the Northern Territory, Melbourne recorded the highest percentage of loss-making sales at 9.5 percent during the quarter.
This figure has increased for two consecutive quarters, indicating a concerning trend.
Among Sydney sellers, 8 percent experienced losses over the June quarter.
In contrast, Brisbane, where property prices have been rising strongly, saw only 0.9 percent of sales resulting in a loss.
Profitability also varied significantly by local government area (LGA).
In the apartment-dense City of Melbourne, 39 percent of properties sold were traded at a loss during the three months leading to June.
Meanwhile, Stonnington recorded 25.8 percent, and Port Phillip noted 21.6 percent of properties sold at a loss.
These trends follow years of new development, often aimed at investors, that has outpaced buyer demand.
Owen observed that Melbourne home values have been declining for six consecutive months.
“It’s fair to say the downturn is becoming more entrenched, especially during a spring selling season with many looking to sell,” she noted.
“This situation exemplifies how the market will be tested regarding how much buyers can spend to make homes profitable.”
In Sydney, Parramatta recorded the highest percentage of loss-making sales at 25.9 percent.
This was followed by Ryde, with 21.5 percent, and Strathfield, which had 19.2 percent of loss-making sales.
Owen pointed out that profitability in Sydney has ticked higher overall, yet weaknesses tend to occur in urban areas with higher density.
She mentioned that the median hold period for loss-making sales in Parramatta was eight years.
This suggests that sellers may have purchased during the off-the-plan apartment boom in the mid-2010s.
Additionally, the research indicated a decline in fast flips of properties.
More owners have recently sold properties they owned for two years or less, possibly due to rising mortgage costs.
However, the share of two-year flippers dipped to 7 percent in June, down from 8.5 percent a year earlier.
Interestingly, flips within the two to four-year range are now on the rise.
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There has been a mixed outcome for owners who purchased properties in tree-change destinations during the era of remote work and low interest rates.
In Ballarat, which recorded the highest rate of loss-making sales among the lifestyle regions analyzed in the report, 6.5 percent of sellers experienced a loss.
Their median hold period was only two years and four months, indicating a quick turnover.
Meanwhile, the Richmond-Tweed shire in northern NSW saw 4.9 percent of sales result in losses, with a median hold period of nearly three years.
Owen emphasized that the housing affordability challenge will eventually impact profitability for sellers.
“It’s a difficult message to accept when affordability has worsened, yet sellers are achieving record profits,” she stated.
“Viewing the housing market solely as a means to generate wealth contradicts the goal of improving affordability.”
PRD chief economist Diaswati Mardiasmo noted that increased apartment developments have raised the supply of homes relative to demand.
This situation has exerted downward pressure on growth in the housing market.
While more housing supply has slightly improved affordability, she cautioned that home borrowers still need to commit to significant mortgages.
If a homeowner decides to buy a property sold at a loss, they might save around $20,000.
However, they would still face the burden of a large mortgage, which can be confusing for buyers.
“It may help with housing affordability, but managing expectations is crucial,” she explained.
“It won’t suddenly reduce the mortgage you’re taking on by half.”
