Article by RP Data research director, Tim Lawless
RP Data’s latest ‘Pain and Gain’ Report for the March quarter of 2013 shows 12.7% of all March quarter re-sales transacted at a loss while the vast majority turned a profit.
Over the first quarter of 2013 RP Data recorded 58,677 residential property re-sales nationally, of these 12.7% recorded a gross loss from the original purchase price. The gross value of the losses associated with these loss making re-sales totalled $463.9 million. Conversely, 87.3% of all March quarter re-sales recorded a gross profit relative to their original purchase price. The gross profit from these re-sales equated to $9.6 billion.
Lifestyle regions continue to show the largest proportion of loss making re-sales, particularly within the unit markets as opposed to detached housing markets. Queensland’s Gold Coast has once again recorded the largest proportion of loss making re-sales, with 37.1% of all March quarter re-sales transacting at a price lower than what the home was purchased for.
In contrast, regional areas often associated with the resources sector have recorded very low rates of loss making re-sales, with Queensland’s Central West, Victoria’s Loddon region and the Kimberley and Pilbara regions of Western Australia all recording fewer than 5% of March quarter transactions at a loss.
The likelihood of making a gross profit or loss is quite different based on the length of time a property has been owned. As a stark example, those homes that were previously purchased prior to January 1st, 2008 (ie pre-GFC) and were subsequently sold during the March quarter of this year, only 8% of re-sales were made at a gross loss. For those homes that were purchased on or after January 1st 2008 the propensity to make a loss on the sale climbs substantially. Of those homes that sold over the March quarter, 25% recorded a gross loss relative to the previous purchase price.
To further illustrate this point, for those re-sales that incurred a gross loss over the March quarter, their average length of ownership was just 4.8 years. Properties that recorded a gross profit were held for an average of 9.7 years, while those homes that recorded a gross profit of more than 100% were owned for an average of 15.4 years.
Across the broad regions of Australia, the most significant proportion of loss making re-sales are being recorded within the Regional Queensland marketplace (27.5%) and in Regional Western Australia (20.2%). The weakness in Queensland is mostly reflective of the conditions across the lifestyle markets such as the Gold Coast, Sunshine Coast and Far North where the correction in home values has been more significant.
The higher proportion of loss making re-sales in Regional Western Australian are predominately located in the non-mining regions to the south and east of Perth.
The lowest proportion of loss making re-sales are being recorded in Canberra (4.8%), Perth (6.3%), Regional Northern Territory (6.8%), and Sydney (7.1%).