Jittery investors keep taking property losses

Bernard Kellerman
Across Australia, the proportion of properties resold at a loss increased to 12.1 per cent in the March 2019 quarter, according to the latest CoreLogic 'Pain and Gain' report for the March 2019 quarter. This was up from just over 10 per cent in the December 2018 quarter, delivering the worst result in six years.

Australia had a total of A$486.8 million in realised gross losses from resales over the March quarter, with highest share of losses nationally seen in Perth (24.8 per cent) and Sydney (19.9 per cent), CoreLogic reported.

Every capital city has seen an increase in its share of lossmaking resales over the March 2019 quarter, relative to the December 2018 quarter.

Conversely, 87.9 per cent of resales over the March 2019 quarter were at a profit (12.1 per cent of sales realised a loss), the lowest proportion of profit making sales since March 2013.

By way of comparison, the share of resales at a profit was 89.5 per cent at the end of the December quarter last year and 91.0 per cent a year earlier.

The scramble out of property has been led by investors: in the first three months of 2019, 10.5 per cent of owner-occupied properties were resold at a loss, compared to 16.7 per cent of investment properties.

"[This is] possibly because in a falling market, investors have the benefit of taxation rules. They would seemingly be more prepared to incur a loss because they (unlike owner-occupiers) can offset those losses against future capital gains," suggested report author CoreLogic research analyst Cameron Kusher.

Looking for a positive spin, CoreLogic noted that investors quitting the market could deliver more supply at a time when demand for housing remains below average, "due to weak conditions and tight credit".

And "on the flipside", total gross profit earned by owners reselling their properties was $14.3 billion.

Those comments aside, analytics company steered clear of any further explanations in its report.

Certainly, APRA's removal of restrictions on interest-only residential lending from January 1 this year is unlikely to be one factor, given Kusher's commentary in late 2018. "I don't know [if] these changes are really that monumental," he told ABC News in December.

"If you look at lending to interest-only borrowers, it's [already] sitting at about 16.5 per cent of new lending, when the cap is 30 per cent."

"What it might do is make it easier for people who are coming to the end of their interest-only mortgages — or are getting into financial hardship — to refinance with a normal lender, without going to the non-bank sector."