The affordable housing markets in Australia where homes are selling at a loss

Almost half the homes in the middle of one major city are selling at a loss as Labor’s Budget tax changes and interest rate rises see more homeowners lose money on real estate - with affordable units bought recently particularly vulnerable during a downturn.

Melbourne’s city centre is by far Australia’s worst performing housing market with 47 per cent selling at a loss, which was ten times the national average of 4.6 per cent during the June quarter for all kind of properties, new Cotality data released on Wednesday showed.

The median $61,250 loss rate in this slice of the central business district was also much higher than the typical Australian loss rate of $45,000.

That marked a slight increase from $44,000 in the March quarter when just 3.9 per cent of homes across Australia sold at a loss, which was the lowest in 21 years even after the Reserve Bank’s February and March interest rate rises, ahead of another increase in May.

With a median price of just $463,576 for units, the centre of Melbourne is a case of an affordable market tanking, with 39 per cent of Australia’s national losses on apartments concentrated in five councils areas of Melbourne and Sydney, including Melbourne, Stonnington, Port Phillip, Parramatta and Sydney.

A short drive away from downtown Melbourne, Stonnington had a loss rate of 33 per cent with this local government area in south-east of the city centre covering Prahan where $553,010 in the mid-point unit price.

In nearby Port Phillip, 25 per cent of homes sold at a loss in a council area covering bayside St Kilda where $535,273 is the median apartment price.

Sydney’s west also has a high loss-making rate with 23 per cent of homes selling at a loss in Parramatta where units typically cost $627,541.

Loss rates are higher in areas where there’s an oversupply of more affordable units but Australia’s biggest price plunges are occurring on expensive houses in more upmarket areas of Sydney by the beach.

While just 3 per cent of homes sold at a loss on Sydney’s Northern Beaches, this council area is also home to Balgowlah Heights where the mid-market house price has plunged by 8.6 per cent during the past three months to a still very expensive $4.2 million, which is more than four times Australia’s mid-point house price.

Traditionally more affordable markets like Logan, south of Brisbane, had a zero per cent loss rate even though Crestmead’s median house price has fallen by 4.2 per cent during the past three months to $851,869.

Rockingham south of Perth also had a zero per cent loss rate, with the mid-point house price falling by 2.5 per cent during the quarter to $900,730.

Charles Sturt council in Adelaide’s west, another area with a zero per cent loss rate, is home to Pennington where house values have fallen by 4.5 per cent to $900,516.

Shadow treasurer Tim Wilson argued Labor’s changes to negative gearing and capital gains tax concessions were hitting high-end markets without improving affordability for first homebuyers.

“It’s very clear that there has been an absolute smashing in confidence in housing, and that is destroying the wealth of Australian households,” he told reporters in Canberra on Wednesday.

“This Government has spectacularly managed a trifecta where rents are rising, so first homebuyers are being knee-capped even before they get their foothold in the market, the price of houses are dropping at the top end while they’re barely moving for first home entrants, which is a spectacular achievement in itself, and then of course they’re smashing confidence.”

Housing Minister Clare O’Neil blamed the Reserve Bank’s three interest rate rise this year, instead of Labor’s Budget tax changes, for residential building completions continuing to lag well behind Labor’s National Housing Accord goal of 1.2m new homes over five years.

“The biggest driver of how many homes get built from year to year is actually what goes on with interest rates,” she told Seven’s Sunrise program on Wednesday.

Ms O’Neil also rejected a suggestion from Sunrise host Natalie Barr that Australia’s housing market was tanking, despite values last month falling in every capital city market except Darwin.

“Well, I don’t agree with that language at all, Nat,” she said.

Cotality’s head of research Gerard Burg said homeowners who had held their property for nine years or more typically made a profit, factoring in downturns.

“Profitability is still exceptionally high by historical standards, but we are starting to see the impact of weaker housing market conditions flow through to resale outcomes,” he said.

“Most sellers are still benefiting from the significant value growth accumulated over the past five years, which is providing considerable protection against the early stages of the downturn.

“With home values falling across more markets, that buffer will become increasingly important in determining resale outcomes.”