Boom to bust: capital city regions where homeowners are losing most money

More than half the homeowners reselling properties in some prominent city areas lost money over recent months, with the average owner losing $75k, alarming research shows.

Panicked property owners have been reselling homes they purchased during the height of the Covid pandemic for staggering losses of up to $75,000, on average, in some areas following record interest rate hikes.

Many of the biggest losses were in higher density areas dominated by investors, along with markets where there had been a sustained downturn in property prices following the end of the resources boom.

The former category included the CBDs of Melbourne and Adelaide, along with the Parramatta CBD in Western Sydney.

The latter group included central Darwin and Perth, according to analysis of quarterly resales data. The research measured the average gap between what owners bought and sold their properties for. Losses were instances where the properties sold for less than the owners paid.

About 55 per cent of sellers in the Perth CBD made a loss.

There was also a national increase in sales from those who had owned their properties for less than two years and the proportion who made a loss rose.

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About one in 10 of these properties changed hands for less than the owners paid, a sizeable shift from a year ago when losses were seldom seen, accounting for about 3 per cent of short turnaround sales.

Losses for sellers who owned their properties longer than two years were rare, according to the Pain and Gain report by research group CoreLogic.

The resale losses also occurred amid a strengthening market, with PropTrack data showing prices have risen by about 2.64 per cent nationally over the past year. The market had been in downturn for much of 2022.

About 30 per cent of sellers in Strathfield in Sydney’s inner west made a loss. Picture: Tim Hunter.

Group head of research Eliza Owen said more home sellers were feeling “pain”, with higher interest rates often prompting sales among those who bought less than two years ago.

“More sellers are willing to incur a loss at the moment, which could in part be the result of high interest rates,” she said.

“Two years is a significant time period because we are two years on from the height of pandemic-related lockdowns, low interest rates, and have just passed the peak of transitions from low fixed rates to high variable rates.”

The median loss of the homes resold after less than two years was $30,000 nationally, but there were areas where the losses were significantly higher.

In the Perth CBD, where 55.2 per cent of all sellers made a loss (including those who bought more than two years ago), the median loss was $70,000.

Just over 40 per cent of sellers in the Melbourne CBD made a loss and the median figure was $47,500. The Melbourne CBD was one of the most popular markets for investors prior to the recent rate hikes.

The Melbourne CBD, including high density suburbs such as Docklands, was one of the hardest markets for investors to make money off their resales.

Losses were less frequent in Sydney, but those who resold for less than they paid tended to do so by bigger margins.

About 30 per cent of sellers in the Strathfield area in the city’s inner west resold for a loss, the highest proportion in Sydney, and the median loss was $65,000.

A similar proportion of sellers in Parramatta made a loss, with the average figure at $53,000.

Adelaide CBD resales had an 18.2 per cent loss rate, with $28,050 the median loss.

Among the five major capitals, resales at prices lower than the vendors paid were the most rare in Brisbane. The Brisbane region with the most frequent losses was the CBD, where 6 per cent of sellers lost money – the lowest proportion of a mainland CBD.

Losses across the country were more common for investors and unit owners.

“The unit sector has seen a lot more weakness in profitability through the recent housing downturn,” Ms Owen said, noting 14.4 per cent of unit resales were at a nominal loss and unit losses were about 4.1 times more likely than house losses.

CoreLogic analysed approximately 83,000 dwelling resales in the June 2023 quarter. The incidence of profitmaking sales nationally, across all property types, was 92.8 per cent

The median gains from resale were $290,000 in the quarter, and the total nominal profit from resales were $25.8 billion.