According to the CoreLogic RP Data Pain & Gain report for the June Quarter, 9.1% of homes resold over the three-month period recorded a gross loss when compared to their previous purchase price.
That figure is up from the 8.9% of homes that were sold at a loss during the 2015 March quarter and is also higher that the 8.6% recorded during the June 2014 quarter.
Over the quarter, dwellings losses amounted to $411.3 million, an average loss of $65,585 per sale.
The highest proportions of loss making resales were recorded in regional WA (24.5%), regional Queensland (22.5%), regional SA (20.9%) and regional Tasmania (19.9%).
On the flip-side, the 90.9% of resales delivered a profit, with 30.8% selling for more than double their previous purchase price.
Profit-making resales totalled $16.1billion, grossing owners $259,174 in profit.
Sydney (98%), Melbourne (94.3%), Perth (91.4%) and Regional Victoria (91.4%) had the highest proportion of homes that resold at a profit.
During the second quarter of 2015, 7.7% of houses resold for less than their previous purchase price compared to 12.6% of unit resales.
Across the capital cities, 5.0% of houses resold at a loss compared to 8.4% of units and in regional markets 12.5% of houses resold at a loss compared to 23.8% of units.
CoreLogic RP Data analyst Cameron Kusher said the report is another illustration of the challenges facing areas that are being affected by the death of the mining boom.
“Across the country’s regional areas, the analysis shows that proportion of loss-making resales is higher than those within the capital cities and trending lower in Regional NSW and fairly flat in most other areas except for Regional SA, Regional WA and Regional NT where loss-making sales are trending higher,” Kusher said.
“The trends in regional areas are shifting with the proportion of loss-making resales trending lower in areas linked to tourism and lifestyle,” he said
“On the other hand, housing markets linked to the resources sector are generally seeing an increase in loss-making resales after housing market conditions in many of these locations have posted a sharp correction.”
The report also gives some ammunition to those who believe the best investment strategy is to buy and hold, with it showing that on average loss making sales occurred after a home had been owned for an average of 5.3 years, while homes sold for a profit were owned for an average of 9.9 years.
The homes that were sold for double their previous purchase price were owned for an average of 16.4 years.
Cam McClellan, chief executive officer of Open Wealth Creation, is one proponent of the buy and hold strategy but he said there are still some occasions when it can make sense to sell at a loss.
“In essence selling is where you will lose money,” McClellan said.
“But in saying that you do have to look at what’s happening in your area, I’m not a fan of throwing good money after bad in terms of trying to improve the value of a property through renovations,” he said.
“If the area you’re in is looking like it’s going to stay flat for a while then you need to do the maths. For instance, if you sell a property for $500,000 and have to pay $100,000 in capital gains and other fees but then you can use that $400,000 to buy a property that will grow a few hundred thousand in five years then I’d swallow that $100,000 and move on.”
