Blog

One in every 10 apartments in Australia sold for less than what the owner paid for it over the March quarter, new research shows.

All capital cities across Australia, apart from Sydney, saw more than 10 per cent of apartment owners sell at a loss in the first three months of the year, according to the latest CoreLogic Pain and Gain report for the March quarter.

In total, 11.7 per cent of Melbourne apartments and 14.1 per cent of Brisbane apartments sold for a loss, while in Darwin more than a quarter of apartment sellers took a hit.

The best result for unit sellers was Sydney, where just 1.9 per cent of apartments sold at a loss. House sellers were more fortunate than apartment sellers in every capital city, apart from Sydney where 2.2 per cent of sellers reported a loss. The Sydney result for houses was still the strongest in the country.

The price falls for apartment sellers, particularly in Brisbane, may be the start of things to come, Domain Group senior economist Andrew Wilson said.

‘It’s the nature of the beast, due to years of high-rise construction pushing supply ahead of demand,’ Dr Wilson said.

‘There’s no doubt there is weakness in prices and [it’s] no surprise capital cities, with the exception of Sydney, have shown lacklustre results,’ he said.

And the majority of those that resold at a loss were investors – 8 per cent of owner occupiers and 11.8 per cent of investors who sold their properties over the quarter did so at a loss. Sydney and Darwin were the only two areas where loss-making investors made up a smaller proportion than owner occupiers.

A part of this could be the popularity of inner-city apartments with investors, HSBC chief economist Paul Bloxham said.

‘On our estimates there is an oversupply in the Brisbane and Melbourne markets and we’re likely to see some continued price declines,’ Mr Bloxham said.

Notably, Sydney investors have been pouring into the Brisbane market where building approvals have reached record highs and the median apartment price has fallen for seven consecutive quarters.

It would be unlikely the expected price declines in apartments would significantly affect the detached housing market and in Sydney ‘there isn’t an oversupply,’ he said.

But the lacklustre apartment result could also due to the length of time some of the properties had been owned for.

Homes sold at a loss across the capital cities were owned for an average 5.4 years, compared to 10.1 years for those sold at a gain, CoreLogic research analyst Cameron Kusher said.

Those sold for more than double their purchase price had been held for an average of 17.2 years.

‘Property ownership, whether for investment or owner occupier purposes, should be seen as a long-term investment,’ Mr Kusher said.

Capital city property owners faced fewer loss-making resales than their regional counterparts. There was an average $72,042 fall in resale price for loss making capital city properties, with the average profit achieved on a home at $294,045. For regional areas, the average loss was $60,689, while the average gain was $140,992.

‘The trends in regional areas are shifting with the proportion of loss-making resales trending lower in areas linked to tourism and lifestyle,’ he said.

‘On the other hand, housing markets linked to the resources sector are generally seeing an elevated level of loss-making resales after housing market conditions in many of these locations have posted a sharp correction.’

Across the capital cities, there were $187.0 million in losses with an average of $72,042 per loss-making resale compared to $10.2 billion in profit at an average of $294,045.


Posted by Jennifer Duke – Domain – The Age on 29th June, 2016