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More than two in five property sales in the City of Melbourne were struck at a loss in the June quarter, despite a broader recovery in property prices.
Some 41.7 per cent of sales traded at a loss, CoreLogic’s Pain and Gain Report, released on Thursday, found. The council area was followed by Stonnington (27.5 per cent sold at a loss), Yarra (22.5 per cent) and Port Phillip (20.1 per cent).
Some sellers in the City of Melbourne area have been “cutting their losses”.Credit: Wayne Taylor
CoreLogic head of research Eliza Owen said these areas were high-density, with units leading the losses in each.
“We’re seeing some investors exit the market and losing money because of relatively high interest rates,” Owen said.
“They’re cutting their losses. Even though the rental market is very tight, it’s not touching the sides of the extra costs of interest rates.”
Other areas were more likely to produce gains, and the strongest included the Mornington Peninsula, the Macedon Ranges and Casey.
As interest rates, which had been rising since May last year, paused over the past three months, the market was slowly improving across Melbourne.
“At a high level, we’ve passed the peak of pain. This report is showing pain for recent home buyers, but on aggregate level, Australians are back on the way to making profits,” Owen said.
The overall profitability picture is improving as the property market recovers. Only 9 per cent of Melbourne property sales traded at a loss in the June quarter, down from 10 per cent in the March quarter.
Melbourne house owners were more likely to make a profit (97.5 per cent) than unit owners (80.8 per cent).
But there was pain among owners who resold within two years. Some 9.7 per cent of quick flips made a loss nationally as recent market entrants felt the stress of higher mortgage repayments.
AMP chief economist Dr Shane Oliver said Melbourne’s market, particularly the unit market, had been hit hard by lockdowns and was still recovering.
He said that, anecdotally, high-end apartments were staying on the market for longer, as were “investor stock” or smaller units.
“It has been a tough market in Melbourne because it was hit harder through the lockdowns, and then it saw a muted recovery,” he said. “Melbourne’s unit market was probably the hardest hit during COVID, with a lack of migrants and a hit to the rental market as well.”
Oliver agreed the improving market could mean more profit at sale for Melburnians.
Melbourne home owners have been holding onto their properties for longer, a separate report found.
The average Melbourne seller in the June quarter held onto their property for nine years before trading, up from eight years for sellers a decade ago, Domain’s Tenure Report, also released on Thursday, found.
The longest tenures for house owners were in Whitehorse East and Whitehorse West, where people waited 13 years before selling.
Stonnington also recorded a high proportion of loss-making sales.Credit: Chris Hopkins
They were followed by house owners in Boroondara, Glen Eira, Nillumbik-Kinglake, Knox and Brunswick-Coburg, who held for 12 years before listing for sale.
The longest term for unit owners was 12 years in Moreland – North, followed by 11 years in Casey – North and Casey – South.
Domain chief of research and economics Dr Nicola Powell said tenures in Whitehorse East and West were among the longest across Australia.
“It’s really about family and finding that forever home,” she said. “They’re not the most expensive areas of Melbourne, but they are on the higher end, and they draw people in for the amenities, the community feel and the schools.”
The medians in these areas were $1.2 million and $1.4 million, she said.
Fletchers Blackburn selling agent Stefan Cook said the popularity of areas such as Box Hill was due to school zones, meaning people held onto their properties for longer.
“I reckon some of it could come down to the fact that Box Hill, Box Hill South and Blackburn South are in the Box Hill High School zone,” Cook said. “I think they hold on until their kids have finished school and then definitely consider whether they downsize or upsize.”
Lots of families bought into the Whitehorse area wanting stability while their children were at school. “I guess once people are in school it’s also the proximity to transport and shops and the community, so generally they do stay longer.”
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