CoreLogic Pain and Gain report | Houses vs Units

Across the nation, a higher proportion of houses are resold at a profit than units.

This trend is also evident across the combined capital city and combined regional markets. 

In Melbourne, units were higher than 9 times more likely to resell at a loss than houses while in Brisbane units were 7 times as likely to resell for a loss as houses and in Canberra units were 12 times more likely to resell at a loss than houses.

For the capital cities, the proportion of houses reselling at a gross profit was lower over the quarter in all capital cities except for Canberra.

For capital city units, the share of resales at a profit was lower over the quarter in all cities except for Brisbane.

For the regional housing markets, the proportion of houses reselling for a profit increased over the quarter in Regional NSW, Regional Vic, Regional Tas and Regional NT.

For units, profit-making resales increased over the quarter in Regional Vic and Regional Tas.

How are the regions with a relatively high proportion of unit resales performing?

Although many regions are seeing a heightened proportion of units reselling at a loss, this is unlikely to spill-over to create weakness in the broader housing market. 

Over the second quarter of 2018, 27.7% of all dwellings resold were units indicating that the overall stock of detached houses is much greater than that of units.

Nevertheless there are many regions around the country where units are the dominant type of dwelling that sells.

Some of these regions have recorded a relatively high proportion of loss while others are seeing minimal loss making unit sales.

Sydney’s City and Inner South saw units comprise 71.3% of all resales over the second quarter of 2018 and 3.1% of these resales were at a loss, up from a lower 1.8% of resales a year earlier.

Of the top 25 SA4 regions listed, 12 SA4 regions that had a greater turnover of units than houses over the second quarter of 2018.

This doesn’t necessarily indicate that unit stock outweighs housing stock in these areas but it does indicate that units are turning-over with more regularity relative to established housing stock.

Of these 25 SA4 regions listed, 18 have recorded an increase in the proportion of units reselling at a loss over the past year and 11 of these regions recorded more than half of all resales over the quarter for units as opposed to houses.

13 of the 25 regions listed recorded double-digit proportions of units reselling at a loss over the June 2018 quarter.

Importantly, a number of these regions are seeing historically high levels of new unit construction; as these regions see new stock additions completed it could contribute to further weakness in resales of established housing stock.

This will be an important trend to monitor over the coming quarters particularly in those regions where losses on resales of units are already heightened relative to 12 months ago.

Investor vs Owner Occupier Resales

Investors continued to be more likely to resell their properties at a loss than owner occupiers during the second quarter of 2018.

Over the quarter, 9.8% of owner occupied properties sold at a loss compared to the 10.1% of investor owned properties.

Sydney, Regional NSW and Hobart were the only major regions of the country in which a higher proportion of investors resold their property at a loss than owner occupiers. 91.5% of capital city properties resold by owner occupiers transacted at a profit over the June 2018 quarter compared to 90.8% of investor owned properties.

Throughout all capital cities the gap in profit making-resales between owner occupiers and investors was not that large however, across individual cities the results were much more varied.

Melbourne investors were 3 times as likely to resell a property at a loss as an owner occupier and in Canberra they were 3.4 times as likely to sell for a loss.

Across the regional areas of the country, investors were slightly more likely to resell a property for a loss (11.9%) than owner occupiers (11.7%).

While in each region owner occupiers were more likely than investors to resell for a profit, the gap between the two vendor type performances was nowhere near as great in regional areas as what was recorded in some capital city markets.

Clearly, any property owner will aim to make a profit from the sale of their property.

In a falling market owner occupiers may be more prepared to sell at a loss if they are purchasing their next home at an equivalent or greater discount.

Conversely, investors, because of taxation rules, would seemingly be more prepared to incur a loss because they (unlike owner occupiers) can offset those loses against future capital gains.

If home values fall, investors (which have until recently been increasingly active in the housing market) may be more inclined to sell at a loss and offset those losses which in turn could result in much more supply becoming available for purchase at a time in which demand for housing falls because values are declining.

Hold Periods

Over the June 2018 quarter houses which resold at a loss had typically been owned for 6.6 years while those resold at a profit had been owner for 9.2 years.

Across the unit market, those properties that resold for a loss had typically been owned for 6.9 years while those resold for a profit had been owned for 7.8 years.

Throughout the combined capital cities, loss-making resales of houses had typically been held for 5.3 years compared to 5.9 years for loss-making resales of units.

Those capital city houses resold for a profit had typically been held for 9.4 years compared to 7.8 years for units.

Houses sold at a loss in Sydney and Melbourne typically had a much shorter hold period than other capital cities while units resold at a loss in Sydney had a much shorter hold period than those in the other capital cities.

These trends reflect the much stronger value growth performances in these cities over recent years.

In terms of profit-making resales, the median hold periods for houses were substantially longer in Perth and Darwin than they were elsewhere.

For units, Perth and Darwin had much longer median hold periods than elsewhere.

These trends indicate weaker housing market performance in these markets over recent years.

In regional Australia, houses resold for a loss were typically held for 7.7 years compared to 8.9 years for those sold at a profit.

For regional unit markets, the average hold period for resales at a loss (8.9 years) was actually longer than for those resold at a profit (8.0 years).

For houses resold at a loss, the typical hold period was shortest in regional NSW and regional Vic and longest in Regional Qld and Regional WA.

For lossmaking unit resales hold periods were much shorter in regional Vic than elsewhere and much longer in regional Qld and regional SA.

For houses reselling at a profit, typical hold periods were much greater than elsewhere in Regional WA.

For units selling at a profit, hold periods were longest in Regional WA but much lower in Regional NSW.

You may also want read:

CORELOGIC PAIN AND GAIN REPORT | NATIONAL OVERVIEW

CORELOGIC PAIN AND GAIN REPORT | HOUSES VS UNITS

from Property UpdateProperty Update https://propertyupdate.com.au/corelogic-pain-and-gain-report-houses-vs-units/