Twelve per cent of Australian properties were resold at a loss – compared with what the sellers had paid for them – 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 (24.8 per cent) and Sydney (19.9 per cent),” CoreLogic analyst Cameron 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 (24.3 per cent) and Melbourne (23.5 per cent), 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, 10.5 per cent of properties owned by owner-occupiers sold at a loss, compared with 16.7 per cent 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.
“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 with the December 2018 quarter.
Across the capitals, the share of properties resold at a loss varied significantly — Sydney (9 per cent), Melbourne (6.4 per cent), Brisbane (11.5 per cent), Adelaide (8.4 per cent), Hobart (2.1 per cent) and Canberra (10.2 per cent).
Meanwhile, resale losses for Perth (32.8 per cent) and Darwin (45.5 per cent) were at record levels.
Houses versus apartments
CoreLogic said that apartments were much more likely to resell at a loss compared with houses.
During the March quarter, the proportion of loss-making apartments (20.5 per cent) far exceeded the number of houses sold at a loss (9.5 per cent).
The number of apartments selling at a loss increased rapidly compared with the December (17.9 per cent) and March 2018 quarters (14.6 per cent).
House owners are also increasingly selling their property at a loss, but the uptick was at a much slower rate — compared with the December (8.3 per cent) and March 2018 (7.1 per cent) quarters.
However, these figures were not as severe compared with regions that are still grappling with the end of the mining boom.
The weakest property market in the March quarter was, by far, Darwin — 58.2 per cent of apartment vendors sold for a loss, compared with 40.8 per cent for house vendors.
It was followed closely by losses in regional Western Australia (apartments: 47.4 per cent, houses: 37.3 per cent) and Perth (apartments: 49.2 per cent, houses: 28.8 per cent).
Meanwhile, ACT (1.9 per cent), Hobart (2.1 per cent) and Melbourne (2.5 per cent) had the lowest proportion of houses selling for a loss.
In regards to house sales, Hobart (2.1 per cent), regional Tasmania (7 per cent) and regional NSW (7.7 per cent) had the lowest proportion of loss-making sales.