Vendors sell for large losses as buyer’s remorse kicks in

13 views 2022-11-11 14:26:45

Vendors are losing hundreds of thousands of dollars reselling homes they bought at the height of the pandemic-led housing boom as interest-rate-wary buyers baulk at paying exorbitant prices in a falling market.

While not all properties being sold within a year or two of purchase are distressed, some recent sales show significant pain for sellers.

In Sydney, the vendor of a one-bedroom terrace with private backyard at 44 Swanson Street, Erskineville in the inner west racked up a $155,000 capital loss after selling the home for $1,060,000, just a year after buying it for $1,215,000.

The owner of a four-bedroom terrace at 57 Grove Street, Birchgrove, also suffered a loss of $150,000 after reselling the home for $4.3 million on October 28, according to RP Data records. The home was purchased for $4.45 million in February 2021.

The 164 square metre property, which failed to sell at auction on September 15, was relisted as private treaty for $4.5 million to $4.7 million range on October 7.

Another property selling for a loss was a one-bedroom terrace at 704/6-8 Crescent Street in Redfern, which recently sold for $868,000. The vendor paid $890,000 for the 63 square metre home in December 2021.

Jack Henderson, founder of Sydney-based buyer’s agency Henderson Advocacy, who bought the Redfern property for a client, said there has been a marked increase in properties being sold within a year of purchase, particularly 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,” he 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.”

Mr Henderson said the rising interest rates were having a disproportionate impact on first home buyers who bought at the top of the market and had little equity behind them.

“I think the seven successive interest rate are starting to scare a lot of younger recent homeowners,” he said.

“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 have risen sharply across most capital cities during October as the large increase in mortgage repayments starts to stretch households’ budgets, according to SQM Research analysis.

In Sydney, there are now 564 homes listed under distressed conditions, a 3.1 per cent rise from September and a 37.2 per cent jump compared to a year ago.

Brisbane is currently recording the largest increase in distressed listings, rising by 15 per cent to 1000 distressed homes.

Lloyd Edge, buyer’s agent and founder of buyer’s agency Aus Property Professionals, said homebuyers who bought land last year were also starting to sell up.

“I’m seeing quite a bit more land coming onto the market because people are struggling with the higher interest rates and sky-high construction costs,” he said.

“In some of the areas I’m buying in, vendors are under pressure to make quick sales, so we’re able to negotiate better pricing and get around 25 per cent discount.”

Some discounted land sales include the block at 83 Henry Lawson Drive, Terranora, which was recently sold for $455,000 – $20,000 below the $475,000 the vendor paid for it in August, according to Mr Lloyd.

Arjun Paliwal, buyer’s agent with InvestorKit, also nabbed a hefty discount buying a block of three units in Norville, Bundaberg, for $581,000.

“The investor had to sell this whole block quickly, so I was able to negotiate down the price,” Mr Paliwal said.

“The bank recently revalued the block for $710,000, so I gained $129,000 equity due to distress sale.”

Victor Kumar, founder of Sydney-based buyer’s agency Right Property Group, said vendors who needed to offload their properties should consider selling sooner rather than later to avoid increased competition in the coming months.

“I think genuine distressed sales will come early next year through to Easter because it takes around 12 to 18 months for the market to feel the impact of higher interest rates,” he said.

“If you’re looking to sell, now’s the time to sell right before the bloodbath happens. But if you’re looking at buying, you’re going to purchase while you still can rather than trying to wait for the market because every interest rate rise decreases your borrowing capacity.”

This article is from Australian Financial Review, please click the following link for the original article: 

https://www.afr.com/property/residential/vendors-sell-for-large-losses-as-buyer-s-remorse-kicks-in-20221102-p5buuy

SHARE

WechatIMG128
Subscribe to our
News Updates
Thank You!

Our service team will contact you to assist you further!