Pain and gain depends on postcode

Pain and gain depends on postcode

Posted on Monday, March 30 2015 at 11:41 AM

CoreLogic RP Data has released its quarterly Pain Gain Report and
its author, analyst Cameron Kusher, notes that making a gross profit or loss on property differs significantly from property to property and area to area, and in some instances is based on the length of time a property’s been owned.

As a stark example, Kusher points out that of
homes purchased prior to January 1, 2008 (i.e. pre-GFC) and subsequently sold
during the December quarter of 2014, only 4.9 per cent of resales were made at
a gross loss. 

However, Kusher says that for homes purchased on
or after January 1, 2008, the propensity to make a loss on the resale climbs
substantially. Of those homes that resold over the December 2014 quarter,
14.1 per cent recorded a gross loss relative to the previous purchase price.

To further illustrate this point, for resales
incurring a gross loss over the December quarter, the average length of
ownership was just 5.9 years. 

Properties that recorded a gross profit were
held for an average of 10.2 years, while those homes that resold for more than
double the previous purchase price were owned for an average of 16.8 years.

So, how did the market perform over the past quarter and
are more properties selling for a profit or loss? Kusher says: “The proportion of loss-making resales has
fallen to 8.6 per cent over the December 14 quarter, from 9.1 per cent the
previous quarter and 9.6 per cent a year earlier.

“Sydney,
Perth and Melbourne have seen the lowest proportion of loss-making resales,” he
adds, continuing “Sydney and Melbourne in particular are reflective of the fact
that these two cities are currently seeing the strongest growth in home
values. Similarly, regional NSW and regional Victoria have recorded the
lowest proportion of loss-making resales across the regional areas.” 

According to Kusher, Sydney and Melbourne (along with regional Vic and regional NSW) are
expected to continue to see a trend towards fewer loss-making sales as the
growth in home values persist. Perth, on the other hand, is likely to see an
increase with the rate of home value growth having slowed sharply over the past
year.

Among the country’s capital cities, Hobart
performed the worst and Kusher believes this is reflective of the ongoing
weakness across that market over the previous decade.

“Across regional markets [the worst] was
Queensland,” he says, “and again this is reflective of the long-running
weakness in coastal markets and the recent weakness being experienced in
regions linked to the resources sector.”
He adds: “I think it’s due to the fact
that unit stock is more likely to be owned by investors and in the case of
financial difficulty the investment property rather than the home is the
property to be sold.”  

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