The proportion of Australian homes selling at a loss is rising, particularly for units

Apartments for sale in Sydney. William West/AFP/Getty Images

Residential property prices skyrocketed in Sydney and Melbourne last year.

They jumped by more than 10%, taking the increase in the median property price in both cities from 2009 to over 80%, according to data released by CoreLogic.

Enormous gains in anyone’s language, delivering some equally enormous profits to owners for simply holding property.

That fact is underlined by the latest “Pain and Gain” report from CoreLogic, a snapshot on the proportion of properties that sold for a higher price than which they were previously bought for during a particular quarter.

In the September quarter last year, only 2.3% of all properties sold in Sydney, and 4.9% in Melbourne, were done so at a loss, well below the national average of 9.4%.

And, as this table from CoreLogic shows, the proportion of loss-making sales for houses were well below those for units during the quarter, with the exception being Sydney.

Source: CoreLogic

“Across the combined capital cities, the report shows that houses were almost half as likely to be resold at a loss compared to units over the September 2016 quarter, with the figures recorded at 5.6% and 10.2% respectively,” said CoreLogic.

With most properties selling for a higher price than what they were bought for, CoreLogic said that $A17.0 billion in realised profits were recorded during the quarter, dwarfing the $A477.9 million figure seen for loss-making sales.

Put another way, the average gain for a profitable sale was $A262,672 during the quarter. In comparison, the average loss was just $A71,529 over the same period.

While the proportion of loss-making sales in Sydney and Melbourne remain at historically low levels, from a national perspective, CoreLogic says the proportion of loss-making resales for both houses and apartments have trended higher over the past year.

This chart from CoreLogic shows the national percentage of loss-making house and unit transactions going back to 1998.

Source: CoreLogic

And while loss-making sales in Sydney and Melbourne remain low from a historical perspective, that was offset by a noticeable lift in those capitals most aligned to the mining sector.

“Although the occurrence of losses rose over the quarter, in most cites the instances of homes reselling at a loss is low with the exceptions being Perth where almost two out of every five dwellings resold at a loss and Darwin where approximately three out of every 10 resales was at a loss over the quarter,” said Cameron Kusher, head of research at CoreLogic.

Here’s the historic trend in loss-making sales in Sydney, Melbourne, Brisbane and Adelaide.

Source: CoreLogic

And for Perth, Hobart, Darwin and Canberra.

Source: CoreLogic

While loss-making sales in Perth and Darwin remain well above the national average, there’s tentative evidence to suggest that the price cycle in both these capitals is now close to bottoming, suggesting that the proportion of properties being sold for less than what they were bought for may begin to decline in the quarters ahead.

We’ll get further clarification on that front later this week when CoreLogic releases its monthly capital city home value index for January.

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