Category: Property Market

Auction Clearance Rates Remain Firm

From CoreLogic.

The auction market will start to gather momentum coming into February after the seasonal slowdown over the holiday period, with auction numbers doubling over the week across the combined capital cities. There were 867 auctions being tracked by CoreLogic this week, with a preliminary clearance rate of 70.8 per cent, compared to last week’s 71.6 per cent across 368 auctions.  Although auction activity has shown a significant uplift over the week across the combined capitals; auction volumes are increasing at a slower rate than what was seen over the corresponding period last year, when 916 auctions were recorded with a similar rate of clearance (70.1 per cent). The lower volumes can be attributed to slower activity across the Sydney market, which was also evident over the same week last year, when volumes were lower over the given period compared to previous years. While the combined capital city clearance rate returned a strong result over the week, as auction numbers continue to gather pace we will get a clearer understanding if auction trends remain as strong as they were at the end of 2016.

The Rise and Rise of Portfolio Investment Property Households

The number of Property Investing households in Australia in rising. Today we look specifically at the fastest growing segment – Portfolio Property Investors.

This sector, though highly leveraged, is enjoying strong returns from property investing, are benefiting from generous tax breaks and many are expecting to purchase more property this year. However, we think there are some potential clouds on the horizon, and that the risks linked to this segment are higher than many believe to be true. Our latest Video Blog post discusses the findings from our research.

The investment property sector is hot at the moment, with around 1.5 million borrowing households now holding investment property and the number of investment loans is the rise. In December according to the RBA, investment loans grew at 0.8%, twice as fast as owner occupied loans, and around 36% of all loans are for investment purposes.

But not all property investors are created equal. Using data from our large scale household surveys, we have looked in detail at those who hold multiple investment properties.

These Portfolio Investors have become a significant force in the market. For example, in November about twenty per cent of transactions were from portfolio investors – or about six thousand transactions. Whilst overall investment loans grew at 0.8%, there was an estimated 4% increase in transactions from Portfolio Investors.

If we plot the overall loan growth trends against the proportion who are Portfolio Investors, we see a that since late 2015, it is these Portfolio Investors who have been driving the market. In addition, more than half of these transactions are in New South Wales, which is the property investor honeypot.

Many Portfolio Investors will have three or four properties, though some have more than twenty and the average is about eight. Some of these households have taken to property investment as a full-time occupation, others see it as their main wealth building strategy.

Property portfolios vary considerably, although we note that there is a tendency to hold a portfolio of lower value property – such as would be suitable for first time buyers, rather than million dollar homes. This is because the rental income is better aligned to the value of the property, and there is more demand from renters, and greater supply.

About half of portfolio investors prefer to buy newly build high-rise apartments, whilst others prefer to purchase a property requiring renovation, because they believe renovation is the key to greater capital appreciation in the long run, even if rental income is foregone near term.

Property Investors are able to get a number of tax breaks, especially if negatively geared. They are able to offset both capital costs by way of adjustments to the capital value on resale and recurring costs, which are offset against income.

Together negative gearing and capital gains makes investment property highly tax effective. There is good information on the ATO site which walks through all the benefits, but in summary you can claim:

In terms of financing, you can also claim:

  • stamp duty charged on the mortgage
  • loan establishment fees
  • title search fees charged by your lender
  • costs (including solicitors’ fees) for preparing and filing mortgage documents
  • mortgage broker fees
  • fees for a valuation required for loan approval
  • lender’s mortgage insurance, which is insurance taken out by the lender and billed to you.

Stamp duty and legal expenses can be claimed as capital expenses.

Given the strong capital appreciation we have seen in property values, especially down the east coast, portfolio investors are less concerned about rental incomes than capital values. Indeed, in recently published research we showed that about half of investment property holders were losing money in cash flow terms – but significantly, portfolio investors were on average doing better.

But these capital gains are now being crystallised by sassy portfolio investors.

If we chart the proportion of portfolio investors who have sold an investment property, to buy another property, it has moved up from 5% in 2012, to 11% in 2016. These transaction means they are able to release net equity for future transactions, and offset capital costs in the process. Once again, portfolio investors in NSW are most likely to churn a property.

Our surveys also show portfolio investors are most likely to transact again in 2017, are most bullish on future home price growth, and will have multiple investment mortgages.

Significantly, many portfolio investors are using equity from one investment property to fund the next, and are reliant on rental income to service the mortgage. They often have multiple mortgages with different lenders. In addition, we found that many portfolio investors are using interest only loans, to keep loan servicing to a minimum and interest charges as high as possible for tax offset purposes.

So long as property prices continue to rise, this highly-leveraged edifice will continue to generate high returns, which are, after tax, better than cash deposits or the share market. Of course the world would change if interest rates started to rise, capital values fell, or the banks clamped down on interest only loans. Overall, we think there are more risks in this sector of the market than are generally recognised.

In addition, we think there is a case to look harder at the tax breaks available to portfolio investors, and suggest that a cap on the number of properties, or value which can be so leverage should be considered. This is because as property values rise, tax-payers end up subsidising portfolio investors more than ever.

So, in summary, our analysis shows the market is being severely distorted, making homes less affordable, and shutting out many owner occupied purchasers who cannot compete. Risks are building, but meantime Property Portfolio Investors are having a field day!

 

 

 

High Auction Clearance Rates Continue

After the summer holidays, auctions are getting back into gear. The preliminary Domain results from today show that clearance rates remain elevated, though volumes are down on the weeks before Christmas.

Sydney achieved 78.8% and Melbourne 78.5%, both higher than last week, and higher than the same week last year. The national clearance rate was 72.6%.

Brisbane achieved 55% on 77 listings, Adelaide 58% on 91 auctions and Canberra 67% on 49 auctions.

The signs are that the property market momentum is being maintained.

Sensible reform to finance affordable housing deserves cross-party support

From The Conversation.

Treasurer Scott Morrison’s visit to cold old London last week in the middle of the Australia summer was time well spent. Morrison made time in his hectic schedule for a lengthy meeting with the UK’s Housing Finance Corporation (THFC) to discuss an affordable housing financial intermediary with its chief executive, Piers Williamson.

Founded in 1987 to make up for the shortfall in public funding, THFC is a finance aggregator and intermediary that co-funds affordable housing for rent and ownership. And Williamson is no stranger to Australia’s housing problems. He has been a source of advice and advocate for policy reform in various Australian industry and government forums. He also has the ear of our largest superannuation funds.

And, much like Australia, the UK has a serious problem with housing affordability and supply, made worse by policy and market settings that fuel instability rental housing. In this context, channelling investment via a specialist financial intermediary towards newaffordable housing provided by landlords with a social purpose makes good sense.

The idea just needs an effective champion in Australia. In fact, it needs a bipartisan team of champions.

How does this financing model work?

Long identified as a glaring gap in Australia’s affordable housing system, bonds issued via a specialist intermediary would steer investment to where it is sorely needed. If combined with appropriate incentives and public programs, it would go a very long way towards producing more affordable housing choices, as in the UK.

International research found the UK’s Housing Finance Corporation to be one of the world’s leading examples of good practice. It funds not only affordable housing but also ensures that investment flows towards registered landlords meeting real accommodation needs.

Researchers have adapted this model in proposals for an Australian Affordable Housing Finance Corporation. Combined with a well-designed guarantee and revolving capital loans program, it’s a feasible approach, as a New South Wales government-funded study found in 2016.

In the UK, THFC combines the borrowing demands from small social landlords with committed public assistance to source the most favourable financing terms available from capital markets. With a guarantee, these enabled housing associations to borrow at a cheaper rate than the UK government.

THFC acts as the landlords’ principal. It issues mortgage bonds on their behalf, raising and passing on funds at a lower cost than would be individually possible.

Public funds on both the supply and demand side are also an important part of the equation. The NSW feasibility study makes it clear that a stable government co-investment strategy is required to ensure affordable supply.

Such a strategy was well established in the UK. But in recent years it has become less generous and stable, which has affected both supply and affordability. The UK experience demonstrates that the greater the share of public investment and stability of revenue settings, the lower the cost of private finance and the more affordable dwellings can be.

Over the past 30 years, THFC co-financed more than 2.4 million dwellings through well-regulated landlords with a commitment to secure affordable housing. These registered social landlords allocate dwellings on the basis of need rather than to the highest bidder. Renting affordable homes to those who need them is their business focus, not capital gains.

These landlords are well regulated for this purpose. In return, they have access to favourable public loans, tax incentives and direct revenue support via the UK’s Housing Benefit.

With detailed knowledge of providing sustainable social housing, THFC is able to assess the financing needs and credit risks of the housing assistance sector. Large institutional investors have little time for this. THFC’s hands-on scrutiny has ensured a zero-default record and stable A credit rating from Standard and Poor’s.

When an intermediary like THFC is combined with a government guarantee it can be even more effective in reducing perceived risks and thus financing costs, as our international research shows. Since 1991, the Swiss government helped to build, then backed, a thriving bond-issuing co-operative. This created a new market for bonds and drove down mortgage interest rates for affordable rental housing.

The UK’s Affordable Housing Guarantee delivered A$4.15 billion at or below the rate of government bonds in its three-year existence. The not-for-profit Housing Finance Corporation was licensed to manage this scheme. With the UK Treasury guarantee, it was able to obtain and pass through funds from the European Investment Bank below government gilts.

What conditions are needed for success?

The longest-term and lowest-cost investment flows to where the risks are known and predictable. In the UK, these risks have been reduced by four key conditions:

  • On the revenue side, rents have been underpinned by adequate levels of assistance for those who need it.
  • Landlords are registered and regulated in England and Scotland to ensure they are not only financially sound but also socially responsible and thus eligible for government support and tax incentives.
  • On the supply side, government funding instruments provides subordinated loans, guarantees and equity.
  • Planning mechanisms provided well-located land for affordable housing development.

These conditions have been in place throughout successive governments, Conservative and Labour. More recently, the emphasis has shifted from social rental dwellings towards affordable home ownership.

The situation in Australia is different. The small community housing sector offers long-term tenancies and shared-ownership housing in a supportive context. However, the sector needs a more sustainable business model to grow.

Current policy settings affecting supply (capital investment, planning provisions) and rent assistance are too weak and uncertain. This can change; it’s all a matter for policy reform. Other countries have moved ahead and Australia needs to catch up.

With an intermediary and appropriate government support behind them, Australian community housing organisations will have the potential to grow, as they have in the UK, US, Switzerland and Austria.

By now Morrison and his team should be well informed, having spoken to the UK experts, boned up on international evidence and consulted Australian industry.

Following the recommendations of the Senate inquiry into affordable housing and Treasury’s own Affordable Housing Working Group, sensible policy reforms such as these are likely to attract cross-party support. They not only draw on proven best practice elsewhere but can be adapted to Australian market conditions and growing needs.

Author: Julie Lawson, Honorary Associate Professor, RMIT University

Building Approvals Past Peak – HIA

The December 2016 update for ABS Building Approvals confirms we are well passed the peak for the cycle, said the Housing Industry Association.

In December 2016 total seasonally adjusted building approvals fell by 1.2 per cent with detached houses down by 2.2 per cent and ‘other dwellings’ sitting flat at +0.1 per cent. On a three month annualised basis total approvals remain above the 200,000 threshold at 204,692.

In December 2016, seasonally-adjusted building approvals increased by 19.5 per cent in Tasmania and 17.0 per cent in Victoria, while in trend terms there was an increase of 1.2 per cent in the Northern Territory. Building approvals fell in Western Australia (-16.3 per cent), New South Wales (-13.2 per cent), South Australia (-5.4 per cent), and Queensland (-0.1 per cent). In trend terms approvals fell by 2.1 per cent in the Australian Capital Territory.

“While a downward trend in building approvals is firmly entrenched, residential construction activity itself will hold up well throughout 2016/17,” said HIA Chief Economist, Dr Harley Dale. “From 2017/18 we will see a sharper decline in new home building activity, primarily due to the medium/high density segment of the market.”

“Building approvals peaked in July 2016, but by December last year were only 18 per cent lower than that peak. Given approvals reached an all-time high last year that’s a modest fall – we can take that away and bank it as a good outcome for the Australian economy.”

“This has been an extraordinary cycle for new home building – the biggest and longest in history. A long tail to the cycle will be helpful for the Australian economy.”

“It is important to focus in 2017 on ensuring Australia has the correct longer term policy settings to ensure we adequately house our growing and ageing population. The recent appointment of Michael Sukkar as Assistant Minister to the Treasurer, with a focus on housing affordability allows the Federal Government to lead from the front in meeting this crucial national objective.”

Over 300,000 Borrowing Households Have Little Or No Housing Equity

According to Roy Morgan, whilst there was a decline in mortgage holders with no real equity in their homes, over 300,000 still at risk. The results show why house prices are important, and why any fall is a problem.

In the 12 months to October 2016, the latest Roy Morgan Research data has identified 6.9% (302,000) of Australian mortgage holders as having little or no real equity in their home. This is based on the fact that the value of their home is only equal to or less than the amount they still owe, placing them at considerable risk if they have to sell or prices decline. Although this is an improvement on the same time in2015 (345,000), it remains a major concern.

Apart from the ability to keep up with mortgage repayments (ie mortgage stress), another critical factor in assessing financial risk for mortgage holders and banks is to compare the value of their property with the amount outstanding on their loan. The purpose of this is to establish the level of equity (if any) that householders have in their home as this generally accounts for the major component of their assets.

Mortgage holders in WA and SA at increased risk

As of October 2016, 10.4% of mortgage holders in WA (54,000) had little or no equity in their home, the highest in Australia and 2.1% points higher than the same period in 2015. SA was the only other state to show a worsening result over the last 12 months, up by 1.8% points to 8.0% (27,000).

Value of home is less or equal to amount owing

Source: Roy Morgan Research Single Source: Mortgage holders 12 months to October 2015 (n=11,249); 12 months to October 2016 (n=10,655).
Of all the states and two largest cities included in this analysis, Sydney has the lowest proportion of mortgage holders with little or no equity in their home: just 3.9% (33,000), down 1.1% points in the last year. This improvement is due to home prices increasing faster than in most other areas of Australia and outpacing the growth in the average amount owing on mortgages. Tasmania is the second-best performer with 4.7% (5,000) of mortgage holders facing equity risk, followed by NSW with 5.1% (73,000), Victoria with 6.0% (65,000), Melbourne with 6.1% (50,000) and Queensland with 7.2% (63,000).

Mortgage gearing or risk lowest in Sydney and Melbourne

The average loan outstanding as a proportion of the average home value (the loan-to-value ratio or LVR) is an important market metric when assessing overall risk in the mortgage market.

The lowest overall mortgage gearing is in Sydney (28.9%) and Melbourne (32.4%), due mainly to the very rapid growth in average property values.

Average home-loan balance as proportion of average home value

 



Source: Roy Morgan Research Single Source: Mortgage holders 12 months to October 2015 (n=11,249); 12 months to October 2016 (n=10,655).

All states other than Victoria and NSW have much higher gearing levels due to negative or marginal increases in property prices. The worst performer is Queensland with a LVR of 44.0%, followed by SA and Tasmania (both on 42.3%) and WA (41.4%).

Lower-value homes face more equity risk in all states

The mortgage holders with little or no equity in their homes have much lower average house values ($457,000) compared to all mortgage holders ($688,000).

Mortgage holders with home value less or equal to amount owing vs all mortgage holders

Source: Roy Morgan Research Single Source; Mortgage holders 12 months to October 2016 (n=10,655).

Across all states and the two major cities, the value of homes owned by mortgage holders is much higher than the value of homes owned by mortgage holders with no real equity in their home. In Sydney for example, the average value of homes with a mortgage is $1.1m, compared to the much lower average of $762,000 for mortgage holders with no real equity. In Melbourne the figures are $795,000 for the average value of a home with a mortgage, well above the $523,000 for those with no equity in their home.

Norman Morris, Industry Communications Director, Roy Morgan Research says:

“Despite some improvement over the last twelve months, there are still over 300,000 home borrowers who have no real equity in their homes. This represents a considerable risk to these households and their banks, particularly if home values fall or households are hit by unemployment. With some early signs that home loan rates are rising, the problem is likely to worsen as repayments increase and home values may decline, which has the potential to lower equity levels even further.

“Due to the strong growth in house prices in Sydney and Melbourne over recent years, mortgage holders in those areas have high levels of equity but are still dependent on a strong labour market and low interest rates to maintain their strong position.

“There are a number of potential reasons that some borrowers are not gaining equity in their homes despite a generally strong property market. These include being in areas with declining values, apartments in Sydney and Melbourne losing value, borrowing more than the real value of the property, falling behind in mortgage payments, and increased borrowing for renovations that haven’t been reflected in increased property values.

“The slowdown in WA’s mining sector is seeing the highest proportion of mortgage holders faced with little or no equity in their homes, and this position has deteriorated further over the last twelve months.

“It is clear that borrowers in lower-value homes are among the most likely to be faced with the problem of low equity levels. Higher-value properties with a mortgage appear to be in a much less risky position because they are likely to have had their loan longer and may have had a far larger deposit, particularly if they traded up.

“Although the majority of Australians with a mortgage have considerable equity in their home, there is always speculation that the rapid growth in house prices must soon come to an end and when it does, so will the growth in home equity”.

Social Impact Investing

The Treasury has release a discussion paper to explore ways the Australian Government can develop the social impact investing market. It is potentially linked to the question of housing affordability.

The Treasurer’s media release said:

There are currently over 180,000 people on social housing wait lists across Australia. The number of social housing dwellings would need to grow by almost 50 per cent in order to accommodate this number of people.

We need to create an investment environment to make a meaningful increase to the available stock of affordable housing, one where the involvement of private investment can contribute to increasing supply as demand grows.

One of the challenges faced by all countries developing affordable housing is access to longer-term, low-cost finance. Access to capital is a critical issue for the affordable housing sector and the ability to leverage private sector investment is required to boost the supply of affordable housing.

While in the UK, I am meeting with leading institutions and entities that have been developing more innovative forms of investment. This includes institutions involved with the £1 billion “build to rent” policy that leverages public spending to encourage large private investors into providing more affordable housing.

This week, I visited the Lendlease Elephant Park site in London, UK. The visit provided an opportunity to view first-hand the affordable housing being offered by the project.

The UK Government has been successfully implementing innovative forms of finance to provide additional sources of funding for social infrastructure, including affordable housing.

The Elephant Park project in London offers 25 per cent affordable housing. Half of the 550 affordable homes will be available as a mix of affordable and social rent, with the other half available under shared ownership. The L&Q Group will take ownership and manage the affordable housing to be built at Elephant Park by Lendlease.

Housing affordability is an important issue for Australia. The Turnbull Government is continually looking at ways to improve supply in the area of affordable housing.

At present, the Commonwealth and state and territory governments combined are spending over $10 billion a year on housing, but it is failing to improve outcomes, particularly for those with low-moderate incomes.

The discussion paper proposes that the Australian Government could primarily support social impact investing by creating an enabling environment for private sector-led social impact investing and by funding (or co-funding with State and Territory Governments) investments which generate savings or avoided future costs to fund reforms and deliver better outcomes for Australians.

Taking a social impact investment approach provides the Australian Government with an opportunity to fund ‘what works’ and reinvest spending that would otherwise not achieve beneficial outcomes.

In many policy areas relevant to social impact investing, the Australian Government is a funder or regulator. For example, the Australian Government has funded social impact investments in the Indo-Pacific region as part of a move towards innovative financing across the whole Australian aid program. The Australian Government is also responsible for financial market regulation, including the regulatory settings that affect social impact investing.

State and Territory Governments are leading on social impact investing, consistent with their responsibility for the delivery of many services which could be delivered through social impact investing, including justice, homelessness and out of home care services. The discussion paper also seeks views on areas where the Australian Government has direct policy responsibility.

The Australian Government could form partnerships with other levels of government to develop social impact investments. Such partnerships could involve sharing data critical to determining the outcomes of interventions. The split of roles and responsibilities between the Commonwealth, State and Territory and local governments shapes the role each level of government could effectively play in developing the social impact investing market.

Two reports have recommended the Government consider moving towards a social impact investment model for funding some social services. The 2015 review of Australia’s welfare system, A New System for Better Employment and Social Outcomes (known as the McClure Report), recommended that the Government consider expanding outcomes based social impact investment models to target financial investments towards addressing social problems.

In 2014, the final report of the Financial System Inquiry recommended that the Australian Government ‘explore ways to facilitate development of the impact investment market and encourage innovation in funding social service delivery’. As part of the Australian Government’s response to the Financial System Inquiry, the Australian Government agreed to prepare a discussion paper to explore ways to facilitate the development of the social impact investment market in Australia.

Social impact investments are investments made with the intention of generating measurable social and/or environmental outcomes in addition to a financial return. Social impact investing is an emerging, outcomes based approach that brings together governments, service providers, investors and communities to tackle a range of social issues.

This discussion paper seeks comments on issues that are relevant to the role of the Australian Government in developing the social impact investing market in Australia.

This discussion paper invites consultation on the Australian Government’s role in developing the social impact investing market. We encourage participants from the community, charitable and private sectors, State and Territory Governments and the public to consider the issues set out in this paper and make a submission.

There are three key components for consultation in this discussion paper:

1. The role the Australian Government should play in the social impact investing market. This discussion paper proposes that the Australian Government could primarily support social impact investing by (i) creating an enabling environment and (ii) by funding (or co-funding with State and Territory Governments) investments which would likely achieve savings to fund the intervention and deliver better outcomes for Australians.

2. The principles for social impact investing have been developed by looking internationally and at the State and Territory level to identify the key principles for effective social impact investments. The principles have also been informed by the Australian Government’s experience in this field to date and consultation with stakeholders. We seek feedback on these principles from interested parties before they are finalised. Once the consultation closes, we will create a revised version of the principles that takes into account submissions.

3. This discussion paper also outlines potential regulatory barriers to the growth of the social impact investment market identified by stakeholders and research on the sector. It seeks views on potential ways that the Australian Government can act to address these barriers, with the aim of facilitating social impact investing.

The submission is open until 27 February 2017.

China injects $1 billion of “suspicious” funds into Australian property

From Australian Broker.

The Australian Transaction Reports and Analysis Centre (AUSTRAC) has reported that in 2015-16, around $1 billion in funds related to property and real estate were transferred between China and Australia.

Typically, AUSTRAC is notified of these matters via suspicious matter reports (SMRs) which are submitted by banks, money remitters and other financial institutions.

Suspicion may be warranted – and a report sent to AUSTRAC – in a number of circumstances including if a bank or institution thinks a person is not who they claim to be, the information given relates to evading tax law or aiding criminal activity, or there is a chance of money laundering or terrorist funding.

John Moss, AUSTRAC’s national manager of intelligence, told Australian Broker that these SMRs indicate a total of $3.36 billion of funds was sent between China and Australia in the stated time period.

“AUSTRAC data shows that the overall total amount of fund flows between Australia and China during 2015-16 was $76.7 billion,” Moss said.

The agency was constantly vigilant to identify increases in the number of suspicious transactions from a number of countries, including China, he added.

“We’re confident that the agency’s approach with our Chinese counterparts through a recently signed Memorandum of Understanding, as well as close collaboration with Australian law enforcement and other partner agencies – such as the ATO, ACIC and FIRB – is providing an effective response to protect the Australian community from such financial crime.”

Foreign Property Buyers On The Rise

According to the latest NAB Quarterly Australian Residential Property Survey, Q4 2016, foreign buyers increased their market share in both new and established housing markets for the first time since late-2015.

In Q4, foreign buyers accounted for 10.9% of all new property purchases (10.2% in Q3) – the highest level since Q1’16. In established housing markets, their share rose to 7.6% (6.4% in Q3) – the highest level since Q4 2015.

In new property markets, foreign buyers were noticeably more prevalent in VIC, where their market share of sales rose to 19.3% (15.0% in Q3).

In WA, their market share grew to 9.3% (6.6% in Q4). Interestingly, the share of foreign buyers in WA has been climbing steadily since Q2’16, suggesting foreign buyers may be seeing greater value as local prices fall.

Foreign buyer levels were however broadly unchanged in NSW at 8.1% (8.0% in Q3) and fell in QLD to 9.2% (10.5% in Q3) to its lowest level since mid-2014.

In established housing markets, the share of foreign buyers increased to 10.8% in VIC (8.5% in Q3) – its highest level in over a year – and 8.4% in NSW (7.2% in Q3). Foreign buyers were also a little more active in WA (5.4% vs. 5.2% in Q3), but were less prominent in QLD, where their market share fell to just 5.0% (5.7% in Q3) – the lowest since mid-2012.

Around 55% of all property purchases made by foreign buyers in Q4 were for apartments, 30% houses and 15% land for re-development.

But these ratios varied quite a lot by state. In VIC, around 47% of sales were for apartments, compared to around 59% in NSW and QLD and 52% in WA. In contrast, around 33% of foreign purchases in WA and 32% in VIC consisted of houses, compared to 27% in NSW and 31% in QLD. Just over 1 in 5 (21%) properties purchased by foreign buyers in VIC were for dwellings/land for re-development purposes, compared to just 11-15% in all other states.

By price point, around 30% of apartments purchased by foreigners were valued at less than $500,000, and 45% were valued at $500,000-$1 million. Around 16% were for apartments worth $1-2 million, 7% for properties worth $2-1 million and 3% for apartments over $5 million.

Around 41% of apartments sales in QLD and 42% in WA were for properties under $500,000, compared to just 20% in NSW and 30% in VIC. Property sales in the $500,000-$1 million range varied from 47% in NSW t0 40% in VIC.

At the prestige end of the market, around 11% of property sales in NSW and VIC were over $2 million, compared to just 6% in QLD and WA.

The proportion of Australian homes selling at a loss is rising, particularly for units

From Business Insider.

Residential property prices skyrocketed in Sydney and Melbourne last year.

They jumped by more than 10%, taking the increase in the median property price in both cities from 2009 to over 80%, according to data released by CoreLogic.

Enormous gains in anyone’s language, delivering some equally enormous profits to owners for simply holding property.

That fact is underlined by the latest “Pain and Gain” report from CoreLogic, a snapshot on the proportion of properties that sold for a higher price than which they were previously bought for during a particular quarter.

In the September quarter last year, only 2.3% of all properties sold in Sydney, and 4.9% in Melbourne, were done so at a loss, well below the national average of 9.4%.

And, as this table from CoreLogic shows, the proportion of loss-making sales for houses were well below those for units during the quarter, with the exception being Sydney.

Source: CoreLogic

“Across the combined capital cities, the report shows that houses were almost half as likely to be resold at a loss compared to units over the September 2016 quarter, with the figures recorded at 5.6% and 10.2% respectively,” said CoreLogic.

With most properties selling for a higher price than what they were bought for, CoreLogic said that $A17.0 billion in realised profits were recorded during the quarter, dwarfing the $A477.9 million figure seen for loss-making sales.

Put another way, the average gain for a profitable sale was $A262,672 during the quarter. In comparison, the average loss was just $A71,529 over the same period.

While the proportion of loss-making sales in Sydney and Melbourne remain at historically low levels, from a national perspective, CoreLogic says the proportion of loss-making resales for both houses and apartments have trended higher over the past year.

This chart from CoreLogic shows the national percentage of loss-making house and unit transactions going back to 1998.

Source: CoreLogic

And while loss-making sales in Sydney and Melbourne remain low from a historical perspective, that was offset by a noticeable lift in those capitals most aligned to the mining sector.

“Although the occurrence of losses rose over the quarter, in most cites the instances of homes reselling at a loss is low with the exceptions being Perth where almost two out of every five dwellings resold at a loss and Darwin where approximately three out of every 10 resales was at a loss over the quarter,” said Cameron Kusher, head of research at CoreLogic.

Here’s the historic trend in loss-making sales in Sydney, Melbourne, Brisbane and Adelaide.

Source: CoreLogic

And for Perth, Hobart, Darwin and Canberra.

Source: CoreLogic

While loss-making sales in Perth and Darwin remain well above the national average, there’s tentative evidence to suggest that the price cycle in both these capitals is now close to bottoming, suggesting that the proportion of properties being sold for less than what they were bought for may begin to decline in the quarters ahead.

We’ll get further clarification on that front later this week when CoreLogic releases its monthly capital city home value index for January.