Units selling for larger loss than houses: CoreLogic

It found that across the combined regional areas, unit losses comprised 16.1 per cent transactions while 10.3 per cent of houses resold at a gross loss.

CoreLogic head of research Tim Lawless said that this trend was true in every capital city and the rest of state region, and that the differential was substantial in those cities where unit values have fallen more materially.

He said that across the capital cities, Darwin stood out.

“It has the highest proportion of loss-making unit resales, with 71 per cent of units reselling at a loss over the June quarter.

“Considering Darwin unit values have fallen by 44 per cent since peaking in May 2010, the high rate of loss on resales should come as no surprise. In fact, Darwin unit values are back to the same level they were in February 2005.

“Darwin house values haven’t fallen anywhere near as much, down by 11 per cent since peaking.”

Mr Lawless said that regional Western Australia was second highest at 56.7 per cent, followed by Perth at 47.8 per cent.

“Both regions have seen unit values fall substantially more than house values,” the head of research said.

“Since peaking in January 2008, regional WA unit values are down by 47.5 per cent and now back to levels seen in 1988. In Perth, unit values are 18.2 per cent lower after peaking in July 2013 and are now worth around the same value as they were in May 2006.”

He said that Brisbane’s unit against houses loss ratio was 29.2 per cent compared with only 4.1 per cent of houses.

“Brisbane unit values are back to where they were in August 2007 after declining by 10.8 per cent from their 2008 peak.”

Mr Lawless said that Hobart recorded the lowest unit loss, at just 2.9 per cent.

“Hobart unit values are at a record high after recording solid capital gains over the past few years. It was only five years ago, after a long period of weak housing market conditions, when 25 per cent of Hobart units were reselling at a gross loss.”

Mr Lawless said that Sydney units were second lowest.

“Despite rising levels of unit supply, only 3.5 per cent of Sydney units resold at a gross loss over the quarter,” the head of research said.

“Unit values are down by 2.6 per cent since peaking in November last year, and values remain 43 per cent higher relative to five years ago. With a recent history of such strong capital gains, the vast majority of Sydney unit owners are still in a positive value position relative to their purchase price. However, as values continue to slip lower and supply levels rise, we are likely to see loss-making resales rise.”

Mr Lawless said that the resale losses were due to a variety of factors, including that units are more likely to be owned by investors, that they are more prone to oversupply and the relationship they have to underlying land values.

“Around 68 per cent of units are investor-owned, 51 per cent of town houses are owned by investors and only 22 per cent of houses,” Mr Lawless said.

“Even though dwelling values are sliding in some markets, land prices have generally held firm or continued to trend higher. Detached houses have a stronger relationship with land values which is likely contributing to the long-run[ning] trend of higher capital gains for houses relative to units.”