ns are more likely to lose money if they sell an apartment in a big city, new data shows.
CoreLogic’s head of research Eliza Owen said units in inner-city Melbourne and parts of western Sydney were particularly risky investments.
‘The off-the-plan apartment boom has clearly meant lasting losses for sellers in Sydney and Melbourne,’ she said.
In the middle of Melbourne, 44 per cent of properties sold at a loss in the December quarter, with vendors typically losing $65,500 in high-rise apartment suburbs with a 3000 postcode.
This was in an area where vendors had owned the unit for 10 years.
Ms Owen said economic weakness in Melbourne since the pandemic lockdowns was also weighing on prices.
‘The high incidence of loss among Melbourne resellers in such a short hold period reflects other indicators of financial stress in this market, such as weaker economic outcomes for the city since the pandemic, elevated listings volumes and weaker property market conditions more broadly,’ she said.
Other inner Melbourne councils were also bad for investors, with 24.9 per cent of sellers making a loss in the Port Phillip council area covering Port Melbourne and St Kilda, typically forgoing $42,450, CoreLogic’s Pain and Gain report revealed.
In the nearby Yarra local government area, covering Richmond and Carlton North, 23.1 per cent of sellers went backwards, typically losing $41,750.
In parts of Sydney, almost a quarter of vendors made a loss in areas with more high-rise apartment towers.
In Parramatta, in the city’s west, 24.2 per cent of sellers lost money, typically parting with $45,000, even after eight years of home ownership.
On the other side of the Parramatta River in Ryde, 22.7 per cent of sellers made a loss, typically losing $60,000.
In Strathfield, in Sydney’s inner west, 23.2 per cent of sellers made a loss, typically getting $70,000 less than what they paid after eight years.
CoreLogic said sellers were most likely to do badly in areas where there was a flurry of construction activity during the 2010s.
‘Capital growth across these markets has generally been weighed down by high levels of unit development that was a hangover from a short, strong period of investor activity through the early-to-mid 2010s, which was characterised by a lot of off-the-plan apartment purchases,’ it said.
‘Through the late 2010s investor demand was greatly reduced amid temporary macro-prudential policies.’
Ms Owen said stricter lending rules in the late 2010s had also hurt investor demand for units, following an uptick in apartment building activity.
‘This meant elevated unit supply while demand in the investor market was cut off by tightening lending conditions in the late 2010s,’ she said.
‘The result has been much stronger growth in houses nationally in the past decade than units.’
Darwin was by far the worst performing capital city market overall with 31.4 per cent of homes selling for a loss, typically losing $72,000 even after 10 years of ownership.
These unlucky sellers are clearly the exception with 94.8 per cent of sellers nationally making a profit in the December quarter, typically having a capital gain of $306,000.
Houses are more likely than units to go up in value with only three per cent selling at a loss, compared with 10.1 per cent for units in the December quarter.