More houses selling at a loss

Adam Smith 17 September 2018 NEWS

house and money1While the vast majority of homes resold at a profit, the proportion of profit-making resales was at its lowest since October 2013.

The CoreLogic Pain and Gain Report has found 89.8% of Australian homes resold during the second quarter of 2018 saw a profit, with total resale profits topping $15 billion. However, the share of resales at a profit was at its lowest since October 2013.

The proportion of properties resold for a profit fell from 90.1% at the end of the first quarter, and was down from 91.1% a year ago. Meanwhile, loss-making sales were up in all capital cities compared to the previous quarter.

The research found that houses were more likely than units to sell at a gross profit. While 91.5% of houses sold at a profit, 85.2% of units saw a profit.

"This may be attributed to the underlying land value of detached houses, which is a significant part of the overall value. But it’s also because unit markets can be more prone to oversupply than house markets," CoreLogic research head Tim Lawless said.

Investors were also slightly more likely to resell at a loss than owner-occupiers. The report stated 9.8% of owner-occupiers sold at a loss over the quarter, compared to 10.1% of investors.

"Owner occupiers may be more prepared to sell at a loss if they are purchasing their next home at an equivalent or greater discount. Investors have taxation rules to consider, and could be more prepared to incur a loss because, unlike owner-occupiers, they can offset those losses against future capital gains," Lawless said.

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