The top 20 local government areas where more homeowners are selling at a loss

The Australian property market has recorded 17 consecutive months of growth overall, as limited supply and high demand in most markets continue to trump the impact of higher interest rates. The median Australian home value lifted 8 percent over FY24, but not every part of the market is strong.

The profitability of resold properties provides an insight into how home or investment property ownership can go right and wrong, with a key factor being the length of time the asset is held. CoreLogic’s latest Pain and Gain report reveals 94.3 percent of 85,000 resales in the March quarter sold at a profit. That’s the highest rate of profitability since July 2010 and reflects recent strong selling conditions in most markets except Victoria and Tasmania.

The median gain per profitable resale was $265,000. Houses were more likely to resell at a profit, with 97.1 percent of house resales profitable compared to 89 percent of apartment resales. The flipside to the data is 5.7 percent of all resales resulted in a loss. The median amount of that loss was $40,000, however, that’s just in the value of the property. It does not factor in the significant costs of buying the property, such as stamp duty; nor the selling costs, such as the agents’ fee.

CoreLogic’s Head of Research Eliza Owen said short-term resales indicate how households are responding to higher interest rates. According to the report: “The two-year resales trend seems to have peaked in the year to August 2023, roughly two years after the peak in fixed term borrowing back in 2021. This data suggests the sticker shock from higher mortgage rates may have had some influence on decisions to sell more property than otherwise would have transacted after a short hold period.”

The median hold period of all resold homes was 8.8 years in the March quarter. “Time in the market rather than timing the market is critical to maximising returns for most resales,” Ms Owen said. “Generally, the longer a vendor holds a property the higher the returns, with vendors selling after 30 or more years attracting the largest median gain of $780,000.” By comparison, the median gain among profitable resales that occurred within two years of purchase was $82,000.

Within the top 20 local government areas (LGAs) of each capital city where the highest proportion of loss-making sales occurred, a common theme was shorter hold periods for the loss-making sales compared to the profit-making sales in 14 of those 20 areas.

Here are the top 20 capital city LGAs for the most loss-making sales in the March quarter.

Melbourne LGA

Loss-making sales totalled 38.9 percent of all resales in Melbourne. The median hold period among loss-making sales was 9.8 years and the median capital loss was $54,500.

Perth LGA

Loss-making sales totalled 38.4 percent of all resales in Perth. Vendors who sold at a loss held their properties for a median of 11.5 years and the median loss was $54,000.

Darwin LGA

Loss-making sales totalled 33.6 percent of all resales in Darwin. The median hold period among loss-making sales was 10.4 years and the median capital loss was $70,000.

Stonnington LGA, Melbourne

Loss-making sales totalled 29.8 percent of all resales in Stonnington. Home or investment owners who sold at a loss held their properties for a median of nine years. The median loss was $57,000.

Palmerston LGA, Darwin

Loss-making sales totalled 26.5 percent of all resales in Palmerston, which is a satellite city to Darwin. The median hold period among loss-making sales was 10.2 years and the median loss was $82,000.

Parramatta LGA, Sydney

Loss-making sales totalled 25.3 percent of all resales in Parramatta. The median hold period among loss-making sales was 7.8 years and the median capital loss was $49,750.

More than a quarter of properties sold in Parramatta made a loss in the past financial year. Image: Shutterstock

Yarra LGA, Melbourne

Loss-making sales totalled 24.7 percent of all resales in Yarra. Owners who sold at a loss held their properties for a median of 8.2 years. The median loss was $40,000.

Port Phillip LGA, Melbourne

Loss-making sales totalled 23.9 percent of all resales in Port Phillip. Vendors who sold at a loss held their properties for a median of 8.7 years and the median capital loss was $42,000.

Strathfield LGA, Sydney

Loss-making sales totalled 22.8 percent of all resales in Strathfield. The median hold period was 7.4 years and the median loss was $60,000.

Ryde LGA, Sydney

Loss-making sales totalled 22.4 percent of all resales in Ryde. The median hold period among loss-making sales was 7.8 years. The median capital loss was $51,500.

Burwood LGA, Sydney

Loss-making sales totalled 20.9 percent of all resales in Burwood. Home or investment owners who sold at a loss held their properties for a median of just 5.3 years and the median loss was $63,500.

20.9 percent of properties in Burwood sold at a loss in the past financial year.

Vincent LGA, Perth

Loss-making sales totalled 20.5 percent of all resales in Vincent. The median hold period among loss-making sales was 10.2 years. The median loss was $40,000.

Maribyrnong LGA, Melbourne

Loss-making sales totalled 20.4 percent of all resales in Maribyrnong. The median hold period was 6.7 years and the median capital loss was $37,250.

Boroondara LGA, Melbourne

Loss-making sales totalled 19.7 percent of all resales in Boroondara. Property owners who sold at a loss held their assets for a median of 9.1 years and the median loss was $40,000.

Moonee Valley LGA, Melbourne

Loss-making sales totalled 17.9 percent of all resales in Moonee Valley. The median hold period was 7.3 years. The median capital loss was $41,000.

Belmont, Perth

Loss-making sales totalled 17.4 percent of all resales in Belmont. The median hold period among loss-making sales was 10.1 years and the median loss was $35,000.

Cumberland LGA, Sydney

Loss-making sales totalled 15.4 percent of all resales in Cumberland. Home or investment owners who sold at a loss held their properties for a median of 7.2 years. The median loss was $35,000.

Subiaco LGA, Perth

Loss-making sales totalled 14.3 percent of all resales in Subiaco. The median hold period among loss-making sales was 10 years and the median loss was $50,000.

Victoria Park LGA, Perth

Loss-making sales totalled 13 percent of all resales in Victoria Park. The median hold period was 10.2 years. The median capital loss was $42,500.

Sydney LGA

Loss-making sales totalled 12.6 percent of all resales in Sydney. The median hold period among loss-making sales was 7.2 years and the median loss was $57,000.

Australian home values rose by 8 percent over FY24 despite the impact of 13 interest rate rises between May 2022 and November 2023 putting immense strain on household budgets. A lack of supply of homes for sale amid strong buyer demand trumped the usual dampening effect of higher rates in FY24. Additionally, strong jobs and population growth coupled with relative affordability turbocharged home values in the two best–performing capital city markets of Perth and Brisbane, where median prices lifted 23.6 percent and 15.8 percent, respectively, in FY24.

CoreLogic’s head of research Eliza Owen notes that when interest rates began to rise in May 2022, there was a peak-to-trough 7.5 percent fall in the Australian median home price before a new growth cycle began in early 2023. Since then, there have been 17 consecutive months of growth. Property values in Sydney, Brisbane, Adelaide and Perth are now at record highs, having recovered all their losses in the downturn of 2022. Regional Queensland, South Australia and Western Australia are also at record-high median values.

“There are a few explanations for why housing values have continued to rise even as the cost of debt has risen, and borrowing capacity has eroded,” Ms Owen said. “Tight labour market conditions and an accumulation of savings through the pandemic have broadly underpinned mortgage serviceability, mitigating a need to sell as rates have increased, the construction sector remains squeezed, and unable to deliver a large backlog of dwellings, and strong population growth has increased demand for housing, both for purchase and rent.”

“The composition of buyers may also be propping up purchases, with higher deposit sizes indicating the current buyer profile may be less debt-dependent than when interest rates were at record lows,” she said.

Many first home buyers have higher deposits because of the Bank of Mum and Dad. Additionally, data from property settlement company PEXA shows one in four sales across the eastern states in 2023 were cash sales to buyers not purchasing with debt, who were therefore unaffected by higher mortgage rates. Such buyers included downsizing baby boomers and high-income earners and foreign investors in the prestige sector.

For most of this year, interest rate cuts have been anticipated due to falling inflation, which may have also stoked some buyer enthusiasm, Ms Owen said. However, recent data indicates inflation may be stickier than expected as it nears the Reserve Bank’s target band of two to three percent. As a result, some economists now expect at least one more rate rise to keep inflation on a downward course.

“Another rate rise would slow housing demand, and some cracks are already showing,” Ms Owen said. “Despite resilience in the headline numbers, there are some suggestions that demand is already weakening. Another 25 basis point rise in the cash rate in August, all else being equal, would take monthly repayments on the current median dwelling value to over $4,000 per month.

“Not only is this further out of reach for prospective buyers, it would likely also represent a further blowout in the premium of holding a mortgage relative to renting. The bigger that premium becomes, the weaker demand for purchases may become relative to renting, despite rent growth still sitting well above average.”

The Reserve Bank released the minutes of the board’s June meeting on Tuesday. In its deliberations, the board noted that the narrow path to returning inflation to target by 2026 “was becoming narrower” and recent economic data “reinforced the need to be vigilant to upside risks to inflation”. The board also noted that “the extent of uncertainty at present meant it was difficult to rule in or rule out future changes in the cash rate target”.