National, the total gross value of properties resold at a profit over the September 2017 quarter was $17.7 billion which far outweighed resales losses which amounted to $453.8 million. 

The latest CoreLogic Pain & Gain report a quarterly analysis of resold properties, looks at whether properties sell for less than, or more than their previous purchase price and provides insights into the performance of markets; typically a low proportion of loss-making resales indicates a stronger market compared to those that are experiencing relatively higher proportions of loss-making resales. 

Proportion of total resales at a loss/gain, houses vs. units,
Sep 2017 quarter

2017-12-18--paingain

Key Findings:

  • Residential resales generated $17.7 billion worth of profit nationally 
  • Residential resales generated $453.8 million worth of losses nationally 
  • 90.8% of all properties resold transacted at a price at, or in excess of the previous purchase price.
  • The proportion of resales at profit virtually level with the June 2017 quarter and the September 2016 quarter, both of which recorded 90.9% of resales at a profit.
  • 92.6% of capital city properties resold for a profit compared to 87.8% of regional properties.
  • Proportion of profit-making resales across capital cities unchanged from the previous quarter but lower than the 93.3% of resales a year earlier. 
  • Proportion of resales at a loss nudged a little higher recently 
  • Profit-making resales appear to have peaked in line with the peak of the housing cycle in Sydney and a slowing of growth in Melbourne. 
  • Combined national non-capital city markets show 87.8% of resales at a profit unchanged over quarter and up from 86.7% a year earlier.   
  • CoreLogic reported that over the first three quarters of 2017 there has been a slight increase in the proportion of properties reselling for less than their previous purchase price.   

According to report author Cameron Kusher this is largely being driven by capital city markets in which the instances of loss-making resales have trended a little higher while the regional markets are seeing a decline in loss-making resales.   

He said, “Despite ongoing commentary about the weaker unit market conditions, the Pain & Gain September quarter research showed that detached houses have actually driven the increase in lossmaking resales over the first three quarters of 2017.”  
 
The findings also highlight that the instances of loss-making resales of units is now lower than it was at the end of last year in a number of cities and steady in Sydney and Melbourne. 

With the housing market now broadly seeing a slowdown in the rate of value growth with values falling in Sydney, Mr Kusher anticipates that the instances of resales at a loss will likely continue to trend higher throughout the final quarter of 2017 and into 2018.   
  
Houses have largely driven the slight increase in loss-making resales to-date however, the supply of new units under construction remains at near record highs and investor demand continues to ease.   

Given this, Mr Kusher said, “It is reasonable to expect that the instances of loss-making resales of units may climb over the coming year as the housing market loses momentum and supply increases.”  
 
Resales at a loss in Sydney, Melbourne and Hobart remain exceptionally low and in Sydney in particular the proportion is likely to rise.  On the other hand, more than a quarter of resales in Perth are at a loss however, market conditions appear to be improving which could lead to falls in loss-making resales over the coming year.   

Coastal markets close to capital cities saw loss-making resales trend lower over recent years.  Mr Kusher said, “As values fall in Sydney, this could lead to some increases in loss-making resales in areas surrounding Sydney.”   

Meanwhile, resales at a loss are likely to remain low in Geelong and are expected to trend lower on the Gold and Sunshine Coasts.   

During the previous housing market downturn in 2010 to 2012, the proportion of loss-making resales increased from its lowest level of 5.0% in April 2010 to a peak of 13.0% in September 2012.  With the housing market softening, depending on if values fall in 2018 and the magnitude of these falls we could see the previous downturn trends in the proportion of loss-making resales repeated.