Short-term home resales are on the rise and mortgage stress is becoming a reality for many homeowners – what could this mean for you?

In recent times, the Australian property market has seen an intriguing shift. Homes being sold less than two years after purchase are reaching numbers not seen since 2014. This trend, confirmed by CoreLogic’s latest data, is not merely a statistical anomaly. It carries with it a suite of implications and underlying factors that industry stakeholders, potential homebuyers, and policymakers should be keenly aware of.

Here, I will delve deeper into the reasons behind this trend, its implications, and strategies homeowners can adopt to navigate this evolving landscape.

What's happening?

While the property market has historically been viewed as a stable and long-term investment opportunity, an increasing percentage of homeowners are opting for short-term resales. Usually linked to times of property boom, this trend is unusual as we are seeing vendors choosing to flip properties when the market is not at its strongest, sometimes incurring a loss.

Although this trend is predominantly affecting segments of the market with high mortgage levels, there are still parts of the market in which homeowners are not overly impacted by the vagaries of interest rates. These market areas are showing continued high demand and encouraging price growth, which is expected to continue.

However, according to data from CoreLogic ¹, in the March quarter, 8.4% of national resales have been for properties held for less than 2 years. This figure has increased from 6.3% recorded for the same period last year. While the median results from short-term resale still show a profit, however modest, the number of vendors selling at a loss has also risen to 12.4%, indicating that economic pressures are forcing some homeowners to sell their properties in less-than-ideal conditions.

In contrast to the national figures, Sydney has seen a less striking uptick in properties being sold within a two-year window, with data showing an increase from 5.4% in October to 5.7% in April. Though this might seem like a modest rise, it’s still significant given the backdrop of Sydney’s property prices, which have been on an upward trajectory in recent months, although they have not shown the explosive growth seen in traditional booms. With values up by 4.5% on the last quarter ², we would usually expect to see people holding onto properties to make the most of long-term capital growth in this climate

What's behind this trend?

While we may imagine that properties are being flipped by investors cashing in on quick, albeit modest, capital gains, the fact is that the looming spectre of mortgage stress, driven in part by rising interest rates and the resetting of fixed-rate loans is playing a significant role in shaping our market at the moment.

Clearly, the RBA’s interest-rate hiking cycle has had a major impact on many homeowners who borrowed close to the hilt at record-low rates only to be hit with a huge increase in their monthly repayment once the fixed-term portion of their loan rolled into a variable rate.

The unfolding scenario paints a multifaceted picture. While many homeowners are still able to service their mortgages, there’s a clear pressure point emerging from the current economic pressures of the rising cost of living combined with increasing interest rates and fixed-term mortgages switching to their variable portions. 

It’s certainly not something we want to see more of, but in the face of these real pressures, I feel it’s worth looking at ways in which homeowners can adapt and what strategies they can employ  to navigate these shifting sands.