INDUSTRY NEWSNationalNEWS

Many properties to sell at a loss as mortgage holidays end

The latest CoreLogic Pain and Gain report suggests that loss-making sales by distressed property owners are expected to soar during this quarter.

The report showed that the June quarter only saw a slight rise in loss-making sales, with the market being mostly shielded by the mortgage holiday.

With repayments reinstated since the end of September, the market is bracing itself for a slew of investors selling at a loss.

12.8 per cent of properties sold at a loss in the three months to June, rising just 0.5 per cent from the March quarter. But CoreLogic warns the effects of COVID-19 will start to be felt more severely.

“The reduction in the volume of loss-making sales reflects a reluctance to sell when economic conditions are weak,” the report states.

“This reluctance may have been facilitated by mortgage repayment deferral policies through the pandemic, where those who are currently unable to service their mortgage may not have had to sell through the June quarter.

“However, since June, there have been instances of lenders signalling that distressed borrowers, particularly investors, should look to sell before the end of repayment deferrals₁.

“This could see an increase in loss-making sales over the following two quarters, particularly in more high-risk, investor concentrated markets.”

The report also notes that while the increase in loss-making sales may not have been as dramatic as anticipated, “the portion of loss-making sales is relatively high historically” with the 12.8 per cent of loss-making sales “well above” the five-year average of 9.8 per cent.

It also notes that investors were more willing to sell at a loss than owner-occupiers.

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