Number of distressed property sales is falling

The number of distressed sales - where sellers put their homes on the market because they can’t afford mortgage repayments - is falling around the country, even despite worsening inflation and interest rate pressures.

A new Domain report shows that the number of distressed listings has declined in each capital city between January 2021 and June 2023, although there are some suburbs where cost pressures still bite as investors who bought at the peak of the crisis try to sell off before they lose more money.

Those buyers who are selling up were likely driven by a fear of missing out (FOMO) and snapped up investment or second properties in interstate lifestyle locations when interest rates were at a record low, but now interest rates are steadily and continually rising, they’re overstretched.

But even though cost pressures from rising interest rates and inflation have not eased, the numbers are still low and falling.

Sydney: In Sydney, only 3.6% of listings were a result of financial pressures in June 2023, compared to the December 2022 high of 5.2%.

Melbourne: In Melbourne, Domain’s data shows it was 1.7% as against 2.3% 6 months ago. 

Brisbane: Distressed sales in Brisbane have fallen 4.6%, down from 7.1% 6 months ago.

The city has suffered most largely due to the Sydneysiders and Melburnians who flooded to the state during and post-COVID to buy holiday homes and investments, which they are now struggling to afford. 

Adelaide: Adelaide’s distressed listings increased slightly between May to June – from 1.1% to 1.2% – but the figure is still down from its peak level of distressed listings (1.3%) late last year. 

Hobart: In Hobart, the figure was 0.9 per cent, down from its high of 1.2 per cent in April 2023.

Canberra: In Canberra, the data shows distressed selling is down to 1.1% from 1.7%.

Darwin: In Darwin, the figures are down to 5.4%, down from 7.3 per cent in March 2023.

Regions where distressed selling is highest

1. Barkly, Tennant Creek, NT (15.6% distressed sales)
2. Sunnybank, QLD (13% distressed sales)
3. Wynnum-Manly, QLD (12% distressed sales)
4. Mudgeeraba-Tallebudgera, QLD (11.9% distressed sales)
5. Gold Coast Hinterland, QLD (11.7% distressed sales)

Of the top 5 regions for distressed selling, 4 are located in Queensland.

In fact, Domain’s data found that eight of the 10 regions in the country with the most distressed listings are in Queensland, mostly around Brisbane’s southeast and east, and on the Gold Coast.

Only two regions featured in the top 10 - Barkly in the Northern Territory, with its main town, Tennant Creek, at number one, and Fairfield in Sydney’s west in ninth place.

In Barkly, the Domain report found, 15.6% of listings in June 2023 were by distressed sellers which is a 2.4% increase over the past year.

Queensland dominates the remainder of the list, with Brisbane’s Sunnybank leading the way with distressed listings at 13%.

Wynnum-Manly in Brisbane’s eastern suburbs had the next-highest proportion of distressed listings at 12% – down 2.4% over the year, according to Domain.

Other hard-hit areas include Mudgeeraba-Tallebudgera on the Gold Coast, where 11.9% of listings are distressed, and the Gold Coast Hinterland, where the proportion of distressed listings has risen 5% over the year to 11.7%.

Elsewhere, the most affected region in NSW is Sydney's Fairfield which had 10.8% of listings classed as distressed, in WA’s West Pilbara there were 10.1% distressed listings, and in Victoria Casey South had the highest at 4.6%.

In SA Charles Sturt had the highest number of distressed listings at 3.2%, in Tasmania the hardest hit was Brighton at 2.8% and, in the ACT, Belconnen came in first place with 2.3%.

Remember, property investment is a long-term strategy

This is the time to dig in your heels and take a long-term view rather than sell up and exit the market in a panic.

The property market is on the cusp of a new cycle, and the opportunities for those willing to stay the course are plentiful and while there will be challenges and risks ahead, that is the nature of investment.

Never forget that residential property in Australia is a long-term investment - prices will go up and down in the short term, but over the long term, the market has always trended upwards.

In fact, the value of well-located residential properties has doubled every 7 to 10 years over the last four decades.

This means investors who take a long-term focus are more likely to be successful.

They will be able to ride out the short-term fluctuations and benefit from the long-term growth of the market.

About Brett Warren Brett Warren is National Director of Metropole Properties and uses his two decades of property investment experience to advise clients how to grow, protect and pass on their wealth through strategic property advice.