Vendors' pain as a third of Melbourne apartments sell for loss during COVID-19

author-avatar By on July 10, 2020
Vendors' pain as a third of Melbourne apartments sell for loss during COVID-19

Pictured: Melbourne. Photo by John Kappa on Unsplash

One in three apartments in Melbourne sold for a loss in the March quarter, as a second wave of the virus and new lockdown measures raise concerns of a bigger hit on the property market.

The CoreLogic Pain and Gain report shows 87.7% of national property sales made a profit in the March 2020 quarter - but not everyone was a winner.

In Melbourne, 33.6% of homes sold at a loss at a median value of $44,500.

These 120 properties were all apartments, and 68.6% of them were owned by investors.

As Melbourne goes back into lockdown, fears have been raised that the second wave of coronavirus could have a bigger impact on the property market.

Buying a home or looking to refinance? The table below features home loans with some of the lowest variable interest rates on the market for owner occupiers.

Lender
Advertised rate Comparison rate Monthly repayment Rate TypeOffsetRedrawOngoing FeeUpfront FeesLVRLump Sum RepaymentAdditional RepaymentsPre-approval
VariableMore details
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Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

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  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
VariableMore details
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Nano Home Loans Variable Owner Occupied, Principal and Interest (Refinance Only)

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VariableMore details
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Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

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  • For a chance to win $100K towards your home loan, apply with Athena before Oct 31 & be approved by Dec 15
  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
VariableMore details
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Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

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Yard Home Loan (Principal and Interest) (Special) (LVR < 70%)

  • Unlimited additional repayments
  • Unlimited free redraws
  • Optional 100% offset can be added for $120 p.a.^
VariableMore details
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services

Rates correct as of September 28, 2021. View disclaimer.

CoreLogic Head of Research Tim Lawless said it's likely the Melbourne property market will be hard hit.

"If the housing market’s performance through the previous lockdown is anything to go by, it’s highly likely that Melbourne property transaction activity will see a sharp drop over the next six weeks, with both a material decline in new listings as vendors lose confidence in testing the market, and a lower number of sales as buyers retreat to the sidelines," Mr Lawless said.

"Real estate agents are arguably more prepared to switch towards an online selling environment, however, as we have seen through the previous lockdown period, the negative impacts of weaker confidence and less ability to inspect a property is likely to result in less buying and selling activity.

"With dwelling value declines already being led by the Melbourne market, which saw dwelling value declines of 2.3% in the June quarter, it is highly likely that there will be an increase in the portion of loss-making sales in the metropolitan area over the coming months."

Nationally, the report found that 87.7% of homes sold at a profit in the March quarter, slightly down from 88.7% in the December quarter.

However, a 32.4% decline in transaction activity in April suggests that the second half of 2020 could see an increase in loss-making sales.

CoreLogic Head of Research Eliza Owen said the impact of COVID-19 was felt more in the drop in transaction volumes, rather than in loss-making sales.

"There has been an uplift in the portion of loss-making sales over the March quarter. But despite the potential for some fallout from COVID-19 at the end of the quarter, only a small portion of the loss-making sales are a reflection of the onset of the pandemic," Ms Owen said.

“The Pain and Gain results over the second half of 2020 could see an increase in the portion of loss-making sales, but the volume of sales activity may be more subdued, as vendors were less likely to test the market at the height of the pandemic.

"However, assistance for mortgage holders whose jobs and incomes have been impacted by the pandemic was likely also instrumental in keeping loss-making sales low.”

Biggest winners (and losers)

Across the capital cities, most areas saw an increase in the number of loss-making sales over the March quarter.

In Darwin, over half of the properties sold (50.5%) did so at an average loss of -$119,000.

But in Hobart, vendors enjoyed average gains of $217,000 where 97.6% of sellers sold at a profit.

Portion of loss-making sales - March 2020 quarter Portion of loss-making sales - December 2019 quarter Change (%)
Sydney 7.6% 7.9% -0.2%
Melbourne 6.8% 6.3% 0.5%
Brisbane 12.9% 12.0% 1.0%
Adelaide 10.0% 8.9% 1.1%
Perth 36.3% 36.1% 0.2%
Hobart 2.4% 2.7% -0.4%
Darwin 50.5% 47.7% 2.8%
ACT 10.6% 10.2% 0.5%

Source: CoreLogic

In Sydney, the biggest losers were in Burwood where 22.4% of properties sold at a loss, followed by Parramatta (15.9%) and Ryde and Strathfield (13.5%). 

Nationally, houses were less likely to sell for a loss than units, with 90.3% of houses sold at a profit compared with 80.2% of units in the March quarter.

The median profit for resales was $130,000 for units and $230,000 for houses.

Across the capital cities, the higher number of loss-making unit sales was in Darwin, where 68.6% of units sold at a loss.


Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Great Southern Bank, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.
  • If you click on a product link and you are referred to a Product or Service Provider’s web page, it is highly likely that a commercial relationship exists between that Product or Service Provider and Savings.com.au

Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.

In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*Comparison rate is based on a loan of $150,000 over a term of 25 years. Please note the comparison rate only applies to the examples given. Different loan amounts and terms will result in different comparison rates. Costs such as redraw fees and costs savings, such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.

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Emma Duffy is Assistant Editor at Your Mortgage and  Your Investment Property Mag, which are part of the Savings Media Group. In this role, she manages a team of journalists and expert contributors committed to keeping readers informed about the latest home loan and finance news and trends, as well as providing in-depth property guides. She is also a finance journalist at Savings.com.au which she joined shortly after its launch in early 2019. Emma has a Bachelor in Journalism and has been published in several other publications and been featured on radio.

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