Despite the downtrend in dwelling prices over the latter parts of 2022, the share of sellers experiencing a loss remained contained.

CoreLogic’s Pain and Gain Report showed that the portion of loss-making resales in December quarter increased from the previous quarter to 6.9% but lower than the decade average of 9.6%.

CoreLogic head of research Eliza Owen said the decline in the volume of property sold in the final quarter of 2022 reflects the reduced appetite for property purchases and the dampened sentiment by vendors who were unwilling to sell in a weaker market.

“Though the underlying cash rate target increased 300 basis points between April and December 2022, homeowners increasingly opted not to sell in the current downswing,” she said.

“Still, the proportion of vendors selling for a loss remains relatively low, despite a rapid decline in home values in many markets.”

Overall, 93.1% of resales during the quarter made a nominal gain, amassing a combined value of $25.1bn. This, however, was down 7.3% from the previous quarter.

Profit-making resales hit a recent high of 94.2% in May 2022.

Meanwhile, the combined value of losses also declined in the quarter, down 4.9% to $241.4m.

In nominal terms, the median value for resale profits was $256,000 while that for losses was $40,500.

Holding periods increase, short-term profits plunge

One key trend over the quarter was the increase in the median hold for resales and the decline in short-term profits.

Over the quarter, the hold period went up 9.9% across Australia.

One in 10 loss-making resales nationally were on properties owned for two years or less. For those who resold for a profit within two years of purchase, the nominal gains were $94,000.

“That’s still a strong result but it’s a significant decline from the $170,000 gains being achieved in the March 2022 quarter from properties purchased amid the onset of COVID-19,” Ms Owen said.

“The opportunity for very short-term gains in the property market have notably shifted from the windfalls of early 2022.”

Units still a loss maker

Over the quarter, the difference between house and unit loss-making resales went up significantly, the largest gap on record.

Houses outperformed units in terms of the incidence of making a profit.

They also recorded higher gains of $350,000 versus the median gain of $145,000 in units.

“Since the start of the current cycle in late 2020 through to December 2022, national house values were 20.9% higher, and unit values only 10.1% higher,” Ms Owen said.

“After a turbulent cycle, houses ended up with higher value gains, which helps to explain why the rate of loss-making house sales is so much lower than what's occurring across the unit segment.”

Has the market bottomed out?

Australian dwelling values seemed to have started stabilising in the beginning of 2023, showing a surprise upside in February that went on over the first half of March.

Still, Ms Owen said while a slowdown in the downtrend also corresponds with a moderation in the rate of loss-making resales, it is still too soon to say whether this would mean a bottom for the market.

“While the rate of loss-making sales may show an increase in the coming quarters, the jump may not be as substantial as the 30-bps increase over the December quarter,” she said.

There is an overall expectation of an improvement in housing market conditions by the second half of 2023 and into 2024, assuming that the RBA will have finished lifting rates.

“If that occurs, the market may give way to a rise in housing demand amid improved consumer confidence and the strong return of overseas migration,” Ms Owen said.

“Any upward pressure on home values would broadly increase the chance of making a nominal gain from resales —this could also see the housing market cycle move through the largest national downswing on record, without hitting record levels of loss-making sales.”


Photo by AbsolutVision from Pixabay.