Loss making resales hit two-year high

by Phil McCarroll29 Sep 2016
New analysis shows nearly one in 10 properties resold in the June quarter resulted in a loss.

CoreLogic’s June quarter Pain & Gain Report shows 9.5% of properties resold over the three-month period resulted in a loss, up from 9.3% in the March quarter. The June quarter figure is the highest proportion of resales that has resulted in loss since the March 2014 quarter.

Across those dwellings which resold at a loss over the quarter, the total value of loss was $459m with an average loss of $73,009. Profit making resales generated $15.7bn and an average profit of $262,550 per resale, with 29.4% of resold properties transacting for more than double their previous purchase price.

Over the quarter, there was a split between capital city and regional markets when it came to resales resulting in a profit or loss.

The report shows 5.9% of capital city houses resold at a loss over the three months, while 9.5% of resold for less than the previous purchase price.

In the regional markets 12.2% of houses and 19.9% of units resold over the June 2016 quarter transacted below previous purchase price.

CoreLogic research analyst Cameron Kusher analyst said it’s no surprise that more units tend to be resold at a loss.

“Houses have typically recorded a superior rate of capital growth to that of units and those houses reselling at a profit tend to record a much greater profit than units. These factors go some way to explaining why units are recording a much higher proportion of loss-making resales than houses,” Kusher said.

“Another point to consider is ownership - units rather than houses are more likely to be owned by investors. The ability to offset losses on investment properties against future capital gain is likely to provide investors with much more of an incentive to sell at a loss than owner occupiers,” he said.

Losses for units and houses in capital cities averaged $67,456 and $94,926 respectively, while profits averaged $229,596 and $363,442 respectively.  

Losses for units and houses in regional areas averaged $61,944 and $64,423 respectively, while profits averaged $107,680 and $154,773 respectively.  

Around the country, the proportion of loss-making resales over the quarter increased across each capital city excluding Melbourne and Canberra.

Over the period, 20.1% of Perth homes resold at a loss, while in Darwin, 24.2% of homes resold at a loss; the highest proportion since December 2002.

Across the remaining capitals, the proportion of loss-making resales was: Sydney 2.4%, Melbourne 4.4%, Brisbane 8.4%, Adelaide 10.6%, Hobart 10.8% and Canberra 9.6%.
“While loss-making resales increased over the quarter, historically, most cities are still seeing quite a low instance of homes reselling at a loss. However, Perth and Darwin are the exceptions with the proportion of loss-making resales at, or close to historic highs,” Kusher said.

Across the regional markets, the proportion of loss-making resales increase in New South Wales, Victoria, Queensland and Western Australia, and is unchanged in South Australia.

Across the regional areas, the proportion of resales at a loss were recorded at: 7.3% in regional NSW, 9.3% in regional Vic, 19.8% in regional Qld, 21.7% in regional SA, 33.8% in regional WA, 19.6% in regional Tasmania and 21.2% in regional NT.