More loss, less profit for short term property holders
Property owners who bought within the past two years cut their losses as the heat comes out of the market and interest rates bite
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The number of Australian properties selling at a loss is on the increase, new data from CoreLogic has shown.
The CoreLogic Pain & Gain report for the June quarter revealed sales of properties sold within two years of purchase showed a significant rise in the number of those selling at a loss, up 9.7 percent compared with 2.7 percent a year ago.
CoreLogic Head of Research and report author Eliza Owen said the results reflect the turbulence of the past two years, with the market impacted by COVID and increases in the cash rate.
“Two years is a significant time period because we are two years on from the height of pandemic-related lockdowns, low interest rates, and have just passed the peak of transitions from low fixed rates to high variable rates,” Ms Owen said.
“The portion of homes sold within just two years increased by one percentage point to 8.5 percent over the past year, however the portion of these short-term resales where the seller incurred a loss has increased more substantially, from just 2.7 percent a year ago to 9.7 percent in the June quarter.
“This suggests more sellers are willing to incur a loss at the moment, which could in part be the result of high interest rates.”
The losses were felt in far greater numbers by owner/occupiers, who made up 72.1 percent of short term resales, compared with 27.9 percent for investors. Vendors in regional areas were also more likely to be feeling the pain, an indication that the treechange love affair is over for some.
“Around one in 10 regional Australian property sales were held for only up to two years,” Ms Owen said.
“A further breakdown of this data by SA4 regions shows some of the highest concentrations of short-term resales were in parts of regional Queensland, including Wide Bay (17.3 percent), the Gold Coast (15.2 percent) and the Darling Downs – Maranoa region (14.4 percent). This suggests that people might be selling up after trying to live, or invest, in more remote regional or lifestyle areas.”
In good news for potential investors, Ms Owen said the outlook for home values this year was positive.
“The rate of profit-making sales tends to follow capital growth trends,” she said. “With home values continuing to rise through July and August, we estimate the level of profitability from resales will also move higher through the September quarter.”
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The typically busy spring season for the housing market was a dud, and the summer isn’t looking much brighter.
Housing services companies like Zillow Group and Rocket RKT +3.78% were loud and clear last week on earnings calls: Rocket CEO Varun Krishna called the quarter through June “one of the toughest spring housing markets in years.”
Jeremy Hofmann, Zillow’s chief financial officer, said on a conference call that the company predicted earlier this year that the market for mortgages would be flat. “We actually now think it’s going to be down low-to-mid-single digits,” he said.
The rest of 2026 will remain challenging for mortgage origination volume, says KBW analyst Bose George. The question now is what happens in 2027. “If mortgage rates remain [around] 6.75%, I think that’s going to be challenging even for next year,” he says.
But what’s bad news for mortgage companies could be a positive for bargain hunters. Buyers can expect prices to grow more slowly—or mildly decline—with less competition as long as mortgage rates remain unpredictable.
Mortgage rates at the beginning of the year were solidly below year-ago levels, notes Zillow senior economist Kara Ng. But they surpassed last year’s levels recently, she adds, referencing Freddie Mac’s weekly survey of 30-year fixed mortgage rates. Last week’s reading, at 6.69%, was higher than year-ago levels for the first time in 2026.
“From the affordability point of view, it’s going to get more challenging in the second half of the year,” she says. “And when affordability gets more challenging, that impacts sales and home price appreciation.”
Mortgage application data tracked by the Mortgage Bankers Association has cooled since the beginning of the year. The trade group expects that the number of mortgage originations in the remaining two quarters will lag behind last year’s levels, after exceeding 2025 levels in the first half.
Rocket’s early-stage data—which the company told Barron’s it derives from its brokerage Redfin, demand for its mortgage products, and signs in its servicing portfolio that a homeowner is preparing to refinance or move—“leads us to expect the third quarter mortgage market to be smaller than the second,” Chief Financial Officer Brian Brown, said on the company’s call. He added that such an occurrence is “something the industry has not seen since 2022.”
Prices will be about flat nationally, Ng says. Zillow’s most recent forecast, which shows how values are expected to change in the year ending June 2027, show them dropping in roughly half of the 100 largest U.S. metros for which data is available.
Buyers aren’t rushing in at a time when mortgage costs are rising and unpredictable. But those with the right combination of patience and cash could stand to benefit. “If you are financially qualified to buy a starter home, you are facing less competition and you’re more likely to get a price cut,” Ng says.
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