The proportion of new residential listings held for less than three years has more than doubled in many outer ring suburbs across Sydney and Melbourne over the past three months compared to the long-term average.
The surge in fast turnaround sales has likely been spurred by a combination of rapid interest rate rises, a reversal of pandemic-induced migration patterns and profit-taking from large recent gains.
But analysis by CoreLogic also shows that the share of short-held listings selling at a loss has ballooned in inner-city areas, reflecting their weaker performance in the past three years.
Nearly half of all short-held listings in inner Melbourne are selling for a loss according to CoreLogic.
Across Sydney, short-held listings accounted for 14 per cent of all new listings but more than a quarter of those were listed below their previous purchase price.
Similarly, in Melbourne, 10.4 per cent of all new stock was held for just three years or less, but more than a third sold for a loss.
Eliza Owen, CoreLogic’s head of research, said the trend could slow from here as the threat of fixed mortgage reset receded.
“I think it will start to slow from here. We’re just past the peak of fixed rate transitions, and it seems most households have managed mortgage payment increases fairly well. So if we’re not at the peak of short-term resales we’re very near it,” she said.
“The more home values rise, as they are expected to in the near term, the more short-term resales are de-risked in terms of servicing outstanding debt.”
House prices had increased by 4.9 per cent nationwide since bottoming out in February this year, with Sydney increasing by 8.8 per cent during the same period.
The share of short-held listings has more than doubled across the Central Coast, now accounting for 18.4 per cent of all new listings compared to the series average of 8.5 per cent.
Similarly, in Sydney’s outer south-west, listings owned for less than three years now make up around 18 per cent of all new stock, also more than double the 8.9 per cent series average.
More than one out of six new listings in the south-west, Blacktown and Sutherland were held for less than three years – twice as high as the long-term series average.
“I’m pretty confident that rising interest rates [are] a factor in people’s decision to sell within a short period of owning their homes,” Ms Owen said.
“Given how high transaction costs are both in time and money, vendors must have compelling reasons to sell, especially if they make a loss from the sale. Mortgage stress and cost of living pressures could be some of them.”
In Mornington Peninsula, the portion of short-held listings rose to 14.4 per cent, nearly double the long-term average of 8.2 per cent. It rose to 13.7 per cent in Geelong, which is about double the 7 per cent series average.
The accelerated rise of short-held listings was distinctly noticeable since May last year when the underlying cash rate started to move higher from record lows, Ms Owen said.
But the large price increases in those areas during the pandemic could have also motivated some vendors to take profit while selling conditions were strong, she said.
“Periods of strong capital gain can be associated with short-term reselling because the seller can realise a strong profit which can offset high transactional costs or might be put towards buying a higher quality property,” she said.
During the pandemic boom, house prices on the Central Coast surged by 45.8 per cent, Blacktown was up 27 per cent, the outer south-west by 31.3 per cent and Mornington Peninsula by 33.4 per cent.
“These areas were popular through COVID and that trend could be reversing now as things return to normal,” Ms Owen said.
“But these are also heavily mortgaged areas, so that can be a factor as well.”
The share of new listings held for less than three years is lower in the inner cities, but the portion of loss-making listings is significantly higher, CoreLogic’s analysis shows.
In Sydney’s eastern suburbs, more than one out of six new listings were held for only three years or less, but more than a third of those were listed below their previous purchase price, which is more than twice the series average.
Meanwhile, in the inner south-west, inner west and inner south, short-held listings accounted for up to 13 per cent of all new listings, but a third of those were listed below their previous purchase price.
In inner Melbourne and inner east, short-held listings made up just 9.6 per cent of all new listings, but more than 43 per cent of those were selling for a loss.
“I think there might be a lot of investors in inner-city markets who would be keen to sell, but they know they’re not going to make as much of a profit potentially, so maybe they’re holding off,” Ms Owen said.
“But for those who are selling within three years of purchase, the risk of making a loss is higher due to the weaker prices in recent years.”
During the pandemic, prices in inner Melbourne rose by just 4.5 per cent, it lifted b 6.4 per cent in the inner east and by 11.4 per cent in the inner south. In the past three months home values increased between 1.2 per cent and 3 per cent.
Across the capital cities, Brisbane had the highest concentration of short-held listings through winter, comprising 19.2 per cent of all listings added to the market.
Perth and Adelaide followed with short-held listings accounting for 15 per cent of new stock.
Nationwide, the share of homes re-listed within three years of purchase rose to 16 per cent, the highest level in the series, which started in 2008.
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