More capital city property owners sell at a loss

The percentage of homeowners who sold at a loss in the June quarter increased in the majority of capital cities.

Most capital cities recorded falls in total property listings over September. Picture: Andrew Henshaw

The percentage of homeowners who sold at a loss in the June quarter increased in the majority of capital cities despite the ­relative strength of the property market.

Property researcher CoreLogic’s quarterly Pain and Gain report, which analyses gross profit and loss at resale, shows the proportion of sales being finalised at a loss rose in six of the eight capital city markets last quarter.

Resales in the period fell 28.2 per cent from the first quarter of the year to 52,000 transactions nationally (down from 72,500). Of those, the number of sales making a loss rose 50 basis points to 12.8 per cent. The change occurred against the backdrop of broader social and economic challenges, such as the first wave of social lockdowns and significant declines in employment, inflation and GDP over the June quarter.

CoreLogic’s head of residential research, Eliza Owen, said the fact that housing was a slow-moving asset helped the sector remain relatively strong in light of the economic shocks.

“The increase in loss-making sales is a reflection of a little more vulnerability in some of the markets where we expected to see some deterioration in values and more pressure on rental markets,” Ms Owen said.

The biggest quarterly increase in the rate of loss-making sales was in the ACT, where the proportion rose 1.9 percentage points to 12.8 per cent. More than a quarter of units in the territory were resold at a loss, reflecting continued weakness despite the resilience of property prices and auction clearance rates.

Darwin (52.1 per cent) and Perth (36.2 per cent) again topped the list for the highest proportion of sales at a loss. However, the proportion did not change in the West Australian capital in the three months, suggesting a stabilisation or potential recovery.

Weaker rental conditions in the unit sector nationally caused the dwelling type to underperform compared to houses at a profit rate of 79.3 per cent, compared to 89.6 per cent. Investors were also more likely to incur a loss than owner-occupiers.

Capital cities reported a higher rate of loss than regional areas in the June quarter. The trend reflects the widening divergence between the two markets, with metropolitan cities largely underperforming.

Spring selling season started a little unusually this year, according to listings data from SQM Research. The total number of properties on the market nationally in September shrunk 1.2 per cent to 289,566 listings, a decrease of 7.4 per cent year on year.

Most capital cities recorded falls in total property listings over the month, with the exception of Sydney and Perth, which had 1.8 per cent and 0.9 per cent increases, respectively.

Melbourne recorded the highest decline in property listings of 4.2 per cent in September amid stage-four COVID-19 lockdowns. New listings in the city over the month totalled 4404, compared to 13,718 the previous year.