An increasing number of owners are reselling their properties at a loss in Australia. Looking at data provided by the most recent “Pain and Gain” report by property analysts CoreLogic, we can see that in the first three months of 2019, 9.5% of houses sold at a loss, while a staggering 20.5% of units sold at a loss.
The worst performing markets, by far, were Darwin and Perth. 45.5% of Darwin property owners sold at a loss in the March 2019 quarter, while 32.8% of properties in Perth were loss-making. Canberra was at 10.2%, while Hobart had the lowest percentage of loss-making resales in Australia at 2.1%.
Looking at the other capital cities, 11.5% of Brisbane properties sold at a loss in the March quarter; 9% in Sydney; 8.4% in Adelaide; and 6.4% in Melbourne. Although looking at this graph, we can see that it’s trending upwards.
The data showed that investors were more likely to resell their properties at a loss compared to owner-occupiers. In the first quarter of this year, 10.5% of properties owned by owner-occupiers sold at a loss, compared to 16.7% for investment properties.
CoreLogic research analyst Cameron Kusher, had these words to say,
“Clearly any property owner will aim to make a profit from the sale of their property. 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.”
Looking at Perth specifically, we can see that almost 29% of houses sold at a loss, while a staggering 49.2% of all Perth units were loss-making.
Mr Kusher had these words to say,
“You're looking at values in Perth that are back to levels last seen in 2007. So when you think about that, anyone who has bought since 2007 has virtually seen no growth or seen values slightly go backwards over that period of time.”
But he did point out that it’s not necessarily a reason for concern. He said,
“Just because an owner-occupier makes a loss, doesn't necessarily mean they're in financial hardship. For example, you could sell your property at a loss, but the property you're buying may well have fallen in value more than yours did. So you might be upgrading into a better property.”
With regards to recent interest rate cuts and changes to lending requirements by APRA, Mr Kusher said,
“It's slightly more positive for borrowers than it has been, but it's not back to the days before 2014, where it was quite easy to get a mortgage. You do have comprehensive credit reporting coming in as well, so there's still going to be that level of conservatism about lending. So we certainly don't think, even in Sydney and Melbourne, that it's going to be a rapid rebound in the market. I think you'll probably see the Perth market bottom late this year or early next year. I think certainly that will bring a few more buyers into the market. You'd have to think that there's a bit of pent-up demand. The point to make is even when the market does start to recover in Perth, it's a long way back to those previous highs.”
Anyway, thank you for watching this video. It certainly looks like investors are willing to ditch properties that they see as loss-making. Depending on where you live, it may just be the time to scoop up a good deal. But certainly, I’m too risk-averse to start investing in property. It’s too bumpy, and there are too many unknowns. What are your thoughts? Is it time to invest, or time to divest?
Blue Macaw by Quincas Moreira (https://www.youtube.com/user/QUiNQUiLHARiAaudio)
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