Lit­tle pain, lots of gain

Herald Sun - Property - - NEWS - PETER FARAGO

IN­VEST­ING in Mel­bourne real estate is as safe as houses, a new CoreLogic RP Data re­port has con­firmed.

The lat­est Pain and Gain re­port found just 4.2 per cent of Mel­bourne home re­sales dur­ing the De­cem­ber 2015 quar­ter sold at a loss.

CoreLogic anal­y­sis showed a com­bi­na­tion of longer hold pe­ri­ods and strong cap­i­tal growth helped keep the num­ber of loss-mak­ing sales steady.

The re­port showed the best ar­eas for sell­ers were Frankston and Wil­liamstown, where just 1.2 per cent of sales made a loss within the coun­cil ar­eas of Frankston and Hob­sons Bay.

Mean­while, the over­sup­ply and poor cap­i­tal growth of units and apart­ments in in­ner Mel­bourne was un­der­lined with 17.2 per cent of home sales within the City of Mel­bourne mak­ing a loss.

CoreLogic head of re­search Cameron Kusher said profit and loss-mak­ing sales re­mained steady com­pared to the pre­vi­ous quar­ter, show­ing the mar­ket had reached an equi­lib­rium.


Ev­i­dence of the price rip­ple ef­fect tak­ing hold in the mid­dle to outer east­ern sub­urbs is shown in the low level of loss­mak­ing sales.

From Banyule in the north to White­horse, Monash and Knox in the east and Kingston and Frankston in the south, each had less than 2 per cent of re­sales over the De­cem­ber quar­ter record­ing a loss.

Barry Plant chief ex­ec­u­tive Mike McCarthy said the re­port re­in­forced the rip­ple ef­fect’s im­pact.

Mr McCarthy said prices had con­tin­ued to grow since De­cem­ber, with the av­er­age price for the Barry Plant Group in­creas­ing 15.8 per cent over 12 months.

“It says there is still plenty of steam left in the mar­ket for those mid­dle and outer sub­urbs,” he said.


Units are three-times as likely to sell at a loss than houses in Mel­bourne, as slower cap­i­tal growth and an over­sup­ply sup­ply take hold. The me­dian price for units in Mel­bourne fell 3.2 per cent last year, while sim­i­lar falls were ex­pe­ri­enced in Carl­ton North, Dock­lands, North Mel­bourne and Parkville.

Re­sale losses were higher in other in­ner city coun­cils. The pro­por­tion of loss-mak­ing sales was highest in Yarra, at 8 per cent, while Maribyrnong, Moonee Val­ley, More­land, Port Phillip and Ston­ning­ton all had a pro­por­tion of loss-mak­ing sales above 5 per cent.


Mel­bourne in­vestors were al­most three-times as likely to take a loss on the re­sale of their prop­erty, com­pared to owne­roc­cu­piers.

While 2.4 per cent of owner- oc­cu­pier sales were loss­mak­ing, 7.1 per cent of in­vestors took a hit when they sold.

This was due to in­vest­ment be­ing more preva­lent in unit mar­kets, which were more prone to loss-mak­ing sales, and that in­vest­ment hous­ing could have a nar­rower ap­peal on the mar­ket than owner-oc­cu­pier hous­ing stock, the re­port stated.

“In­vestors are prob­a­bly bet­ter able to take a loss than owner oc­cu­piers, so maybe some peo­ple are do­ing that,” Mr Kusher said.


While prop­er­ties sold at a loss were owned for an av­er­age 4.4 years, sell­ers that made a profit sold af­ter an av­er­age 11.8 years.

Mr Kusher said this was more typ­i­cal in outer sub­urbs, where cap­i­tal growth was slower and there were less in­vestors.

“In­vestors in the outer sub­urbs are not ex­pect­ing to make a profit quickly and are prob­a­bly more fo­cused on rental re­turn, whereas the in­vestor in the in­ner city tends to be more fo­cused on the cap­i­tal growth and a lit­tle bit of yield, but prob­a­bly not so much.’’

Mr McCarthy said longterm own­er­ship was a key tenet of in­vest­ing. “A lot of peo­ple say it’s not tim­ing the mar­ket, it’s time in the mar­ket,” he said. “If you look back over the past 10 years, Mel­bourne was the only cap­i­tal city to achieve dou­bling of prices.”

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