Many vendors are reselling just a year or two after buying as repayments become too much for them to handle
Home sellers are losing hundreds of thousands of dollars unloading properties they bought at the height of the COVID boom as buyers refuse to pay higher prices in a falling market.
Not all properties being resold within a year or two of purchase are distressed, but some recent sales show significant loss for sellers, according to a report by The Australian Financial Review.
In Sydney, the vendor of a one-bedroom terrace in the inner west took a $155,000 hit after selling the home for $1,060,000 only a year after buying it for $1,215,000. The owner of a four-bedroom home took a $150,000 loss after selling it for $4.3 million on Oct. 28. The home was purchased for $4.45 million in February 2021, AFR reported.
Many people who purchased in the last two years – when interest rates were historically low – are finding they have bitten off more than they can chew now that rates are skyrocketing. Jack Henderson, founder of Sydney-based buyer’s agency Henderson Advocacy, told AFR that there has been a spike in properties being resold within a year of purchase, especially in Sydney.
“We’re seeing a significant rise in the number of vendors selling a property they bought last year, which can be due to a number of factors, but interest rate rises would be among those reasons,” Henderson said. “But they are also selling in a market where buyers are much more cautious, cynical even, as opposed to last year when they’re buying anything and everything because of FOMO, and that obviously impacts prices even more.”
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Henderson said that spiking interest rates had an even bigger impact on first-home buyers who purchased at the top of the market and had little equity behind them.
“I think the seven successive interest rates [hikes] are starting to scare a lot of younger recent homeowners,” he told AFR. “I’m looking at a number of properties that are currently off market, and agents told me the owners need to sell because they bought last year and their cash buffers are starting to dwindle, so they’re now willing to take a haircut on the property as they’re worried about meeting the higher repayments.”
Distressed listings spiked across most capital cities last month, according to an analysis by SQM Research.
In Sydney, there are currently 564 homes listed under distressed conditions, a 3.1% rise from September and a spike of 37.2% over a year ago, AFR reported.
