Short-term resales have become a significant trend, according to a new report
Short-term resales have become a significant trend in the housing market in 2023, according to new analysis by CoreLogic.
The data reveals that during the winter season, 16% of listings added to the market for sale had been owned for less than three years. This marks the highest proportion since 2008, with the 15-year average sitting at only 7.9%. The number of new listings held for three years or less has also reached a series high of 17,828.
“Short-term resales can occur for many reasons, including people ‘flipping’ homes, making large capital gains, or moving for work,” CoreLogic head of research Eliza Owen (pictured above) wrote in a blog on the subject. “But in an environment where interest rates have risen rapidly and cost of living pressures are high, resales due to mortgage serviceability constraints may also be a contributor.”
The trend of short-held listings, which refers to properties sold within the past three years, has been noticeable since May 2022, coinciding with the increase in the underlying cash rate from record lows.
There are notable differences between regional Australia and capital city markets regarding short-held listings, CoreLogic reported. Proportionally, regional Australia has seen a higher increase, with one-fifth of all new listings added to the market during winter being properties purchased within the past three years, dating back to September 2020.
This trend is intriguing, considering the context of the COVID-19 pandemic, which saw a record-level internal migration to regional Australia, CoreLogic reported. ABS data shows that net movements from capital cities to regional areas reached nearly 12,000 in the March quarter of 2021, surpassing the previous decade's average of 5,298. As of March 2023, net regional migration has slightly decreased to 5,645 in the quarter. It is possible that some recent departures from regional Australia are individuals who had moved to these areas during the pandemic, which could explain the sale of properties purchased during that time.
“However, it is worth noting that the rise in short-held new listings was trending higher in regional Australia before the pandemic, from around mid-2019,” Owen wrote. “This was in an environment of falling interest rates, and was near the trough of the downturn in regional Australia from 2019.”
Across capital city markets, the trend of short-held listings is widespread. Brisbane had the highest concentration of short-held listings during winter, making up 19.2% of all listings added to the market. Interestingly, the rest of Queensland also had the highest portion of short-held listings among the combined regional markets, at 23.8%. Southeast Queensland, including the Gold Coast, experienced a substantial influx of internal migration during the pandemic. With the exception of Hobart and Darwin, each capital city is showing near-record high proportions of short-held listings coming to the market during winter, according to CoreLogic.
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A closer look at the data reveals that the highest concentrations of short-held listings were in Wide Bay, Cairns, and the Gold Coast. In the case of Cairns and Wide Bay, the concentration of new listings held for less than three years is more than triple the historic average, while the Gold Coast has a rate double the average. Melbourne, including inner, outer east, and north-east regions, had the lowest concentrations of short-held listings.
Despite this emerging trend, short-term resales are unlikely to pose a threat to overall financial stability, especially as housing market values continue to rise, CoreLogic reported. In fact, periods of strong capital gains are often associated with short-term reselling, as sellers can realise significant profits that offset transactional costs or be used to purchase higher quality properties.
While there has been an increase in the portion of properties listed for less than the previous sale price, it is still lower than the series average. The recent Pain & Gain report by CoreLogic showed that 9.7% of properties held for two years or less were sold at a loss.
The latest listings data indicates that 18% of short-held properties listed were lower than their previous purchase price, slightly lower than the series average of 18.2%. It is worth noting that the pain around short-term resales was more pronounced at the beginning of the COVID-19 pandemic, with 28.3% of vendors selling their recently purchased properties at a loss in the March 2020 quarter, CoreLogic reported.
Considering these factors, it appears that recent short-term sell-offs may have multiple drivers beyond high interest rates or mortgage payment difficulties. Some of the sell-offs may be a result of a reversal in COVID-related migration trends or the realisation of substantial gains, particularly in markets across Queensland, South Australia, and Western Australia, where capital gains have remained robust despite recent rate increases. In these states, the rise in short-term resales has not significantly increased total listing volumes, and selling conditions remain favourable, CoreLogic reported. As home values are expected to continue rising in the near term, short-term resales become less risky in terms of servicing outstanding debt.
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