Despite the economic shocks brought about by the COVID-19 pandemic, it appears that the number of loss-making house sales was kept in check, according to the latest report from CoreLogic.
The CoreLogic report said the institutional responses to mitigate the risks of the COVID-19 pandemic have helped insulate the increase in loss-making sales. In fact, the share of loss-making sales rose only marginally to 12.8% despite the drop in transaction activity and the overall slowing of the economy.
"Mortgage repayment deferrals have reduced the incidence of distressed sales, and kept stock level low, which may have supported dwelling prices. Low mortgage rates and sustained bank liquidity have also helped limit further price reductions, which would otherwise see a more dramatic increase in the rate of loss-making sales," the report said.
Furthermore, the report said the upswing in national property values prior to COVID-19 helped many sellers prevent a loss. On a national level, housing values were only down by 2.1% since peaking in April.
Six of the eight capital city markets reported an increase in the portion of loss-making sales over the quarter. The highest proportions of homes sold under market value were in Darwin and Perth.
“Interestingly, the portion of loss-making sales did not see a quarterly increase in Perth, which is another piece of data pointing to the stabilising, and even potential recovery, of that dwelling market,” CoreLogic said.
On the other hand, the ACT recorded the biggest quarterly increase in loss-making transactions, rising by 1.9 percentage points to 12.8%. This was a surprising finding, according to CoreLogic, given that the ACT market has been resilient amid the pandemic.
"However, the result is explained through continued weakness in the unit market. The rate of loss-making sales in ACT units reached its highest level since January 2017," CoreLogic said.
This trend was apparent on a national level. In fact, houses had a higher rate of profit-making sales, with 89.6% being sold above the market value compared to 79.3% in units.
The study also found that investors were more likely to incur a loss than owner-occupiers. Around 18% of investor-led transactions resulted in a loss, compared to the 11% incidence among owner-occupiers.
