An increasing number of Australians are selling homes they have owned for fewer than two years, many at a loss, and analysts warn it may be an early sign of mortgage distress.
Key points:
- CoreLogic says there has been an “unusual” increase in the proportion of people selling their home after a short period
- The proportion of loss-making resales that were held for less than two years has trebled since late 2021
- Analysts say owners typically avoid selling at a loss, meaning that rising interest rates are likely forcing some to sell
The data comes from CoreLogic, as part of its regular Pain and Gain report, which looks at whether existing owners have profited or lost from the resale of their homes.
While the overall number of resales over the first three months of this year declined by 6.5 per cent compared to the end of last year, CoreLogic’s Eliza Owen noticed a very strange pattern in the data.
“There is an unusual increase in the proportion of people selling after a short hold period,” she told ABC News.
“Importantly, an unusual number choosing to incur a loss over that period as well.
“This is pretty counter to what we see with this kind of resale analysis, usually, where hold periods actually tend to expand as the market goes into declines.”
CoreLogic’s figures show the proportion of resales that were held by the seller for fewer than two years was 8.4 per cent during the March quarter this year, up from 5.8 per cent in the December quarter of 2021.
Moreover, the proportion of loss-making resales that had been held for less than two years more than trebled from just 3 per cent in the December quarter of 2021 to 12.4 per cent in the most recent numbers from the March quarter.
Ms Owen said the data added some evidence to stories she has been hearing via friends, contacts and social media of some owners deciding to sell before they might be forced to.
“Anecdotally I’ve certainly heard of people selling investment properties or choosing to sell their home because they just can’t afford the mortgage or they know they can’t afford the mortgage in 12 months’ time or when they roll off of their fixed rate,” she said.
“So I think that story holds some weight.”
‘Calmly selling’ despite losses
Ms Owen said her data also understated the true proportion of recent buyers now selling at a loss because it did not include costs such as taxes, mortgage fees, agent charges, marketing and moving expenses.
“This is not taking into account any of the transaction costs associated with buying a property like stamp duty,” she explained.
“So your net profits [for those who made gains] are going to be relatively small as well.”
Fellow property analyst Louis Christopher, who runs SQM research, agreed that relatively few people would have been selling into the falling market unless they felt they had to.
“We’re not really seeing a significant pick-up in listings activity,” he observed.
“Sellers at this point in time have been holding back because they generally don’t like selling into downturns.”
Mr Christopher has also observed a modest uptick in recent buyers selling up, which he speculates is split between people who are cashing in on renovations and those struggling with rising mortgage rates, but he is yet to see any signs of panic selling.
“We look very closely at distressed selling activity, and we’re not really seeing a material rise there,” he said.
“So it’s people who are calmly selling but, yes, there has been a pick-up of people selling within two years of buying.”
However, he warned that the so-called mortgage cliff, where people on cheap fixed rates roll onto much higher variable ones, was less than halfway through and the situation could also deteriorate if an economic slowdown resulted in many people losing their jobs.
“If we were to see a rise in unemployment due to a recession, yes, I would expect to see a rise in that quick turnover activity,” he said.
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