Properties sold at a loss increased in the March quarter with almost one in six units offloaded for less than the owner paid, the data group CoreLogic said.
As owners eyed the rising cost of servicing their debts, the national proportion of resales with a nominal profit sank to 92.3% in the January-March period, down from 93.2% in the preceding three months and marking the third quarter in a row of declines.
The data was collected from about 76,000 resold houses and units that together garnered a profit of $22.7bn in dollar terms not adjusted for inflation. That was about half the almost $40bn profit generated in the final three months of 2021.
Unit sales were more likely to result in losses for their owners, with 15.4% of transactions in the March quarter resulting in a price less than the owner had paid. That tally was up from 13.8% in the previous three months and contributed to a record gap between the profitability of houses and units.
“Given there is generally a higher concentration of investment ownership in the unit sector, the increase in servicing investment mortgages may be a factor contributing to the greater concentration of loss in unit resales,” CoreLogic said in its quarterly Pain and Gain report.
Eliza Owen, CoreLogic’s head of research and author of the report, said average gains remained substantial overall but noted the level of profitability had deteriorated in the past quarter even as the rate of price falls had slowed.
“It’s unusual to see a sharper deterioration in profits through the March quarter, when prices were starting to stabilise,” Owen said. “This could be linked to more short-term selling.”
The Reserve Bank has increased its official interest rate a dozen times since last May and economists expect at least one if not two more rate rises before the cycle ends.
Property data groups such as Domain report an uptick in apparent forced sales on home in outer suburbs of Sydney, a trend that is expected to spread to other regions as the impact of past rate increases and any more to come take effect.
CoreLogic said the portion of resales of properties held for less than two years increased from a share of 3.4% in the March quarter of 2022 to 12.4% for the same quarter of 2023.
“Such short-selling times that involve sellers incurring a loss may be considered unusual because hold periods typically increase during housing value downturns, as sellers try to avoid making a loss,” Owen said.
Among the major cities, Sydney, Melbourne, Perth and Darwin all saw increases in the rate of loss-making sales. Sales in Hobart had the highest proportion of nominal profits at 99% just ahead of Canberra and Adelaide at 98.1% in the black.
In Sydney just over one in 10 sales – or 10.7% – were for a loss in the March quarter, or the highest proportion since the three months to August 2009. Melbourne did not fare much better with 10.2% of resales clocking a loss, CoreLogic said.
