Sydney suburbs where properties are selling at a loss as house prices fall

The research found that 93.3 percent of home sales in the September quarter achieved a paper profit, compared with 93.9 percent in the June quarter and a recent high of 94.2 percent in the three months to May.

Eliza Owen, head of Australian research at CoreLogic, said this year’s decline in property values ​​has increased the likelihood that a property seller will not make a profit.

Units were more likely to sell at a loss than houses.

Units were more likely to sell at a loss than houses.Credit:Ben Rushton

But the data doesn’t yet show a wave of homeowners who bought at the peak and suddenly couldn’t afford their mortgage payments, she said, instead highlighting locations that have had muted growth for an extended period.

“This [downturn] probably exacerbated some of the pain points of losing sales,” Owen said.

“High-density areas like downtown Melbourne, downtown Sydney, Parramatta, Canterbury-Bankstown, these are areas that have seen large additional supply of unit inventory in the 2010s, resulting in subdued growth.”

In Parramatta, for example, loss-making sales had an average build date of 2011, but profitable sales had an average build date of 1995, suggesting older, larger, lower-density homes may be more valuable than higher-end units in lower-quality towers, she said.

Across the country, the median holding period was 7.8 years for units sold at a loss in the quarter and 9.6 years for homes.

Meanwhile, 12.9 percent of unit sales were colored at a loss, compared to 3.8 percent of home sales that were at a loss.

Owen said there was a risk of more loss-making sales and distressed sales in 2023 due to rising interest rates, but given that more than nine out of 10 sales turned a profit that quarter, she didn’t think there would be any significant deterioration would .

“Some people facing sticker shock and struggling with serviceability may sell out in a relatively short period of time,” she said.

AMP Capital’s chief economist Shane Oliver said the real estate downturn is relatively new, but over time more homeowners who bought when interest rates were low could see capital losses if they have to sell – particularly if they lose their jobs, when the economy weakens.

“When interest rates go up, you can skimp and save and make ends meet,” he said.

“If half of a couple loses their job, it can cause real problems, leading to bad sales when they would become losing sales.”

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He said many investors would be able to weather rising interest rates because investors are often in better financial positions than first-time homeowners.

PRD Real Estate’s Chief Economist, Dr. Diaswati Mardiasmo said the increase in loss-making sales is likely to be moderate over the next year as many owners are holding onto their homes rather than selling and losing money and banks are likely to help.

The exception would be motivated sellers due to family separation, death or bankruptcy, but those sales would happen in any market, she said.

“A bank doesn’t like losing its customers,” she said.

“What the banks are trying to do is offer either refinancing options or hardship options or a restructuring of your loan.”

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Brian Lowry

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