Melbourne has recently experienced a significant downturn in real estate performance, topping the list of areas recording notable declines in housing prices. Recent data indicated that resale returns fell across several regions in the last quarter, a clear signal of the impact of falling property values on expected long-term investment returns.
According to a report published by CoreLogic titled Pain and Profit, Melbourne was the most affected among Australian cities, with other cities such as Sydney and Darwin also showing considerable losses. This downturn comes after a long period of prosperity, during which property investments in the country yielded substantial profits over the past two decades.
The report notes that 95.9% of transactions were profitable, with an average gain exceeding AUD 365,000, compared to just 4.1% of sales that recorded losses, averaging around AUD 45,000—most of which occurred in the primary housing unit market.
Gerard Burg, Head of Research at CoreLogic, explained that weaker market performance is often linked to shorter holding periods. The average holding period for loss-making properties was just 8.2 years, compared to 9.2 years for profitable ones.
He noted that a longer holding period is an effective strategy to navigate market fluctuations, while selling within a short timeframe increases the likelihood of losses due to sudden market changes. Burg also added that potential reasons for some loss-making sales include individual financial crises or purchasing properties during peak pricing periods.
The report included a list of the key areas with the lowest profitability rates in the last quarter:
- Melbourne: 45.9% of resales were loss-making, with an average loss of AUD 64,500.
- Stonnington (Southeast): 25.5% loss rate, averaging AUD 54,250.
- Port Phillip (Near CBD): 25.4% losses, averaging AUD 30,000.
- Parramatta (Western Sydney): 23.9% loss rate, averaging AUD 53,000.
- Darwin: 22.1% decline, with an average loss of AUD 50,000.
Burg explained that a major factor behind Melbourne’s significant decline lies in the oversupply of housing units in recent years, which has put downward pressure on their value, causing prices to fall substantially compared to their peak in 2017.
