Twelve per cent of Australian properties were resold at a loss in the first three months of 2019.
It was the highest level of loss-making sales in six years and another sign of weaker property market conditions, according to the latest “Pain and Gain” report by property analysts CoreLogic.
This was also a marked increase from 10.5 per cent (in the December 2018 quarter), and 9 per cent (in the March 2018 quarter).
“Australia had a total of $486.8 million in realised gross losses from resales over the March quarter, with highest share of losses nationally seen in Perth (24.8pc) and Sydney (19.9pc),” CoreLogic analyst Camer Kusher wrote in his report.
On the flipside, $14.3 billion was the total gross profit earned by owners reselling their properties across the nation.
In dollar terms, Australia’s most expensive cities, Sydney (24.3pc) and Melbourne (23.5pc), accounted for most of those profits due to their “higher cost of housing” and “strong growth in dwelling values prior to the recent downturn”.
Comparing investors, owner-occupiers and the capital cities
Investors were also more likely to resell their properties at a loss compared to owner-occupiers.
In the first quarter, 10.5pc of properties owned by owner-occupiers sold at a loss, compared to 16.7pc for investment properties.
“Clearly any property owner will aim to make a profit from the sale of their property,” Mr Kusher said.
“In a falling market, owner-occupiers may be more prepared to sell at a loss if they are purchasing their next home at an equivalent or greater discount.
A record number of Perth and Darwin property owners sold their properties at a loss. (CoreLogic)
“Conversely, investors, because of taxation rules, would seemingly be more prepared to incur a loss because they (unlike owner-occupiers) can offset those losses against future capital gains.”
He also said that all capital cities experienced an increased number of loss-making resales over the March quarter, compared to the December 2018 quarter.
Across the capitals, the share of properties resold at a loss varied significantly — Sydney (9pc), Melbourne (6.4pc), Brisbane (11.5pc), Adelaide (8.4pc), Hobart (2.1pc) and Canberra (10.2pc).
Meanwhile, resale losses for Perth (32.8pc) and Darwin (45.5pc) were at record levels.
Houses versus apartments
CoreLogic said that apartments were much more likely to resell at a loss compared to houses.
During the March quarter, the proportion of loss-making apartments (20.5pc) far exceeded the number of houses sold at a loss (9.5pc).
The number of apartments selling at a loss increased rapidly compared to the December (17.9pc) and March 2018 quarters (14.6pc).
House owners are also increasingly selling their property at a loss, but the uptick was at a much slower rate — compared to the December (8.3pc) and March 2018 (7.1pc) quarters.
20.5pc of apartments sold at a loss, compared to 9.5pc of houses in the March quarter. (CoreLogic)
However, these figures were not as severe compared to regions that are still grappling with the end of the mining boom.
The weakest property market in the March quarter was, by far, Darwin — 58.2pc of apartment vendors sold for a loss, compared to 40.8pc for house vendors.
It was followed closely by losses in regional Western Australia (apartments: 47.4pc, houses: 37.3pc) and Perth (apartments: 49.2pc, houses: 28.8pc).
Meanwhile, ACT (1.9pc), Hobart (2.1pc) and Melbourne (2.5pc) had the lowest proportion of houses selling for a loss.
In regards to house sales, Hobart (2.1pc), regional Tasmania (7pc) and regional NSW (7.7pc) had the lowest proportion of loss-making sales.