Core Logic RP Data’s Pain and Gain report was released for the June at the end of September and revealed consistent trends across the national market and the Brisbane and South Eastern Queensland market.
9.1% of all resales over the June quarter recorded a gross loss at transaction, slightly higher than the 8.9% figure recorded over the March quarter, and higher than the 8.6% from the same time last year.
September 2012 was the last quarter in which the percentage of resales exceeded 10%, at 12.9%.
Capital cities noted a far lower gross loss rate of 6.1% compared to regional areas across the county, which reached 15.2% of resales making a loss.
In dollar figures, $411.3m was realised in losses with an average of $65,585 per house. Gains reached $16.1 billion in profit at an average of $259,174 per property.
The good news is that gross losses most capital cities have trended lower, which includes Sydney, Melbourne, Brisbane, Hobart, and Canberra. In markets where growth has stalled and listings have increased, such as Perth, the increase in loss making transactions has been greater.
In Brisbane, units were the hardest hit, with 31.3% of vendors making a loss during the transaction.
House sales in Brisbane reached a strong percentage for resale gains of 92.8%, behind Melbourne (96.5%) and Sydney (97.8%).
Unfortunately, investors in Brisbane copped the biggest loss with 28% selling their investment for less than what they paid for it.
Regional areas in Queensland also struggled to make solid returns, particularly those linked closely to mining and resources recorded significant loses in resale values. Five of the top 10 loss making resales by town were in Queensland:
1. Mackay (Qld) (47.6%)
2. Fitzroy (Qld) (35.6%)
3. Townsville (Qld) (34.0%)
4. Outback (WA) (32.6%)
5. Wide Bay (Qld) (31.9%)
6. Outback (NT) (30.6%)
7. Cairns (Qld) (25.3%)
8. Wheat Belt (WA) (24.4%)
9. South East (WA) (23.2%)
10. Warrnambool & South West (Vic) (21.0%)
When considering resales, it is worth remembering that holding an asset over the longer term will most likely generate better return on investment. Houses in Brisbane held for 10.2 years made a gain, while houses held for 5.7 years made a loss.
According to the Pain and Gain report, “homes resold after being held for between 5 and 7 years were the most likely to record a gross loss followed by those held for between 3 and 5 years. The data also reiterates the long-term nature of housing investment as well as relatively weaker growth in values over the past decade. Far fewer homes are transacted at a loss when they are held for a decade or more.”
A general rule of thumb is 5, 10, and 15 years.
“Across the country, those homes that resold at a loss had an average length of ownership of 5.3 years. Across all sales recording a gross profit the average length of ownership was recorded at 9.9 years, while homes which sold for more than double their previous purchase price were owned for an average of 16.4 years.”