Almost $1 billion of residential property changed hands in Melbourne on the weekend, but a new report suggests home owners in Sydney may have paid too much for their properties, with many actually losing money on the sale of their homes over the past five years.
Despite figures from other valuation agencies, including RP Data and Rismark International showing house prices continue to rise across the country, data from Residex report shows 24% of properties bought and sold between January 2005 and January 2010 actually sold for less than the purchase price, with the average shortfall about $54,000.
Some of the biggest losses were found in the prestige Neutral Bay area, with some losses equating to over $275,000. In Campbelltown about 36% properties were found to have sold for less than the purchase price.
Residex chief executive John Edwards has said some of the losses can be attributed to inaccurate values, caused by valuers not being given sufficient time on each property in order to accurately price it.
But Matthew Bell, economist at Australian Property Monitors, said market forces and economic activity may be the major culprit.
“This really doesn’t surprise me, when you split Sydney up into different areas, you’ll find areas such as the Southwest had a decline. Before the stimulus hit at the end of 2008, they were already experiencing price falls. It was a two-tiered market, the upper end was going strongly but reversed during the crisis.”
“Three or four years is a long time in the market. The drops are likely to do with the fundamentals, it just probably wasn’t as tight in the area.”
Meanwhile, the auction market has clearly entered 2010 with confidence, with the nation’s two largest markets recording clearance rates of over 80%.
In Melbourne, sales recorded a clearance rate of 86% out of 909 auctions with a total value of $628.3 million, which combined with private sales equates to a total of $951.7 million. Real Estate Institute of Victoria chief executive Enzo Raimondo said in a statement the sales give good indications how the rest of the year will perform.
“The weekend’s results remove any lingering doubts about the depth of demand in 2010. Buyers are very confident at the moment and find they have to compete to get the home that they want, which is leading to higher prices than expected and high clearance rates.”
“Auction numbers reduce next weekend due to the Labour Day holiday, to around 250 and then they increase the following weekend to around 730.”
Bell says the results are actually surprising, and suggests demand is still high despite interest rates continuing to rise.
“I thought the market would be softer based on those rate rises, but what I think this activity shows is that these rises have no effect on demand. The price data will show this as well. I’ve talked to agents in Sydney, and they have also said there has been no effect on demand due to rates.”
In Sydney, clearance rates reached 80% for the first time in months, with 259 properties sold out of 316 on the market, with total sales reaching $224 million.
In Brisbane, rates reached 49% with 19 properties sold, with a total value of $9.6 million, while in Adelaide sales reached a healthy 76% with 25 properties sold, and a total value of $14.3 million.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
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