Higher interest rates could be pushing sellers to accept a loss, with new data from CoreLogic showing the proportion of loss-making, short-term sales has increased.
According to the CoreLogic Pain & Gain report for the June quarter, profitability in Australian home resales rose for the first time in a year, but the proportion of loss-making, short-term resales increased to 9.7 per cent.
It was just 2.7 per cent a year ago.
The report showed that for the June quarter, the rate of profit-making sales increased for the first time in a year to 92.8 per cent of resales.
This is a 40 basis points increase from the previous quarter, and coincides with a 2.8 per cent lift in home values nationally.
But CoreLogic Head of Research Eliza Owen said a deeper dive into the performance of resales over the past two years highlighted more pain for recent home buyers.
“Two years is a significant time period because we are two years on from the height of pandemic-related lockdowns, low interest rates, and have just passed the peak of transitions from low fixed rates to high variable rates,” Ms Owen said.
“The portion of homes sold within just two years increased by one percentage point to 8.5 per cent over the past year, however the portion of these short-term resales where the seller incurred a loss has increased more substantially, from just 2.7 per cent a year ago to 9.7 per cent in the June quarter.
“This suggests more sellers are willing to incur a loss at the moment, which could in part be the result of high interest rates.”
Ms Owen said the profile of loss-making sales was not too different from overall resales in the quarter.
“Of the loss-making resales held for up to two years, the median loss was $30,000, compared to a median profit of $75,000 for nominal gains within the same hold period,” she said.
“Houses made up 66 per cent of short-term, loss-making resales, and 63.3 per cent were in capital cities.”
Owner-occupiers have incurred the most short-term nominal losses at 72.1 per cent, as opposed to 27.9 per cent by investors, a similar split to the portion of overall resales in the June quarter.
Overall, median gains from resale in the June quarter were $290,000 and the total nominal profit from resales was $25.8 billion.
Median losses from resale was $39,982 and the total nominal losses was $323 million.
Adelaide was the most profitable market of all the capital cities and regions, with just 1.8 per cent of loss-making sales.
Meanwhile, Darwin had the highest volume of loss-making resales of all the capitals at 34.3 per cent, followed by Perth at 12.3 per cent.
Outside of short-term resales, the high level trends in profit-making sales broadly show an improvement.
Ms Owen said houses and units saw an increase in the level of profit-making sales nationally, though unit sellers incurred a nominal loss from resale around four times larger than house sellers.
“Only 3.5 per cent of house sales made a nominal loss, down from 3.8 per cent in the previous quarter,” she said.
Ms Owen said the rate of loss-making house sales had remained fairly low and steady since the December quarter of 2021, remaining below 4 per cent.
“The unit sector has seen a lot more weakness in profitability through the recent housing downturn, with 14.4 per cent of unit resales making a nominal loss, or around 4.1 times more likely than house resales,” she said.
“However, the rate of loss-making resales declined 90 basis points from the previous quarter, which has served to narrow the gap in the rate of loss-making sales between houses and units, which had hit a record high in the series last quarter.”
Ms Owen said profitability was expected to rise with home values.
“The rate of profit-making sales tends to follow capital growth trends,” she said.
“With home values continuing to rise through July and August, we estimate the level of profitability from resales will also move higher through the September quarter.”