Biggest loss-making investment regions revealed
The locations where resellers have encountered the biggest losses have been uncovered in a new report.
CoreLogic RP Data’s Pain & Gain report for the September quarter 2014 reveals which regions across the country recorded the greatest proportion of gross losses in resales when compared with the original purchase price.
Over the September 2014 quarter, 9.3 per cent of all home resales recorded a gross loss, up slightly from 9.0 per cent over the June quarter. The figure, however, was significantly lower than the 11.0 per cent recorded over the September 2013 quarter.
The total value of these loss-making resales over the quarter was $383 million and the average loss was $62.246, according to CoreLogic RP Data.
The report shows that regional Western Australia has overtaken regional Queensland as the region with the highest proportion of loss-making resales. Over the quarter, regional WA recorded 22.5 per cent of all resales at a loss, followed by 22.0 per cent in regional Queensland.
“The weakness in these two regions is reflective of the historical underperformance of coastal markets. However, these regions are now showing an improvement in buyer demand and dwelling values,” the report said.
“More recently, the data highlights the growing weakness in markets linked to the mining and resources sector, where values are generally falling.”
Sydney, which CoreLogic RP Data noted “has also been the strongest market for capital growth”, recorded the lowest proportion of loss-making resales at just 2.6 per cent over the September 2014 quarter. Other regions with a low proportion of loss-making resales were Perth (6.0 per cent), Melbourne (6.5 per cent) and regional Victoria and Adelaide (both 9.0 per cent).
The report also claimed that properties held for a short period are far more susceptible to loss.
“Although home values have increased over the past year, 12.1 per cent of owners who purchased and resold in the same year recorded a gross loss (resales in less than a year accounted for just 1.5 per cent of all resales over the year),” the report said.
“Homes resold after being held for between three and five years were the most likely to record a gross loss (18.7 per cent), followed by those sold between five and seven years (16.7 per cent).
“The data also reiterates the long-term nature of housing investment as well as relatively weaker growth in values over the past decade. Of those homes resold between 10 and 15 years from the previous purchase only 48.6 per cent sold for double their original purchase price with the proportion rising to 95.2 per cent for homes sold after 15 years of ownership.”
Breaking it down further, the report noted that “unit dwellings in lifestyle markets are generally showing the largest proportion of loss-making resales”.
The report noted that from a regional perspective, the following encountered the largest proportion of loss-making resales over the quarter:
Mackay (Qld) 37.8%
Townsville (Qld) 28.4%
Fitzroy (Qld) 27.0%
Wide Bay (Qld) 25.9%
Outback (WA) 25.7%
Cairns (Qld) 25.1%
West and north west (Tas) 24.4%
Gold Coast (Qld) 22.5%
Wheat belt 21.5%
Bunbury (WA) 20.2%
On a state level, the cities and regions were ranked according to their proportion of loss-making sales as follows:
Regional WA 22.5%
Regional Qld 22.0%
Regional Tas 19.7%
Regional SA 16.2%
Hobart 15.8%
ACT 12.2%
Brisbane 11.0%
Regional NSW 9.9%
Regional NT 9.8%
Darwin 9.6%
Regional Vic 9.5%
Adelaide 9.5%
Melbourne 6.5%
Perth 6.0%
Sydney 2.6%