Distressed property listings are well renowned for giving lucky buyers a better deal – so what exactly are they, and where are they most likely to be found?
Speaking to host Phil Tarrant on a recent episode of The Smart Property Investment Show, SQM Research’s managing director, Louis Christopher, shared some insight as to the existence of distressed properties in Australia and some of their identifying features.
As part of his work at SQM Research, Mr Christopher noted his own development of a “distressed property report”, which is both “quite fun” and well loved by investors and agents alike.
Explaining, the managing director said, “There’s basically a list of properties that are being advertised as, for example, mortgagee in possession, divorce sale, [or] vendors overseas – and they need to sell now.”
From SQM Research’s perspective, “it’s definitely the wording in the advertising” that leads to the consideration of a property listing as a “distressed” listing.
In compiling his own report, Mr Christopher said there are “about 50 different keywords we look up that could be regarded as distressed, and with that, we then provide the marketing history of that property, what it last sold for and our customers can also look at the current valuation of their property.”
While it can be “hard to tell” how distressed a property is, the director mused that “the longer it is on the market, potentially the more distressed it could be”.
There’s other information that can be a giveaway, too: Especially “when you see things like divorcee sale or deceased listing, more often than not, they’re going to be an owner-occupier property”.
With 18,000 to 21,000 “distressed” properties on the market at any particular point in time – out of approximately 350,000 dwellings that have been listed – there’s one region that regularly tops the list for distressed properties, according to the researcher.
It’s the Gold Coast.
But this is not “because the Gold Coast is necessarily having problems with its property market”, the managing director acknowledged.
“I think it’s more to do with the fact that the demographic tends to be rather transient,” he offered.
“People get married and then they divorce after here and they move on.”
“People do come and go,” Mr Christopher acknowledged.
He also downplayed the impact that mortgage defaults do have on distressed property sales Australia-wide.
Despite potentially tougher lending situations, Mr Christopher said, “It’s never really been a spike in our numbers since we’ve been doing it.”
Reiterating the consistency of figures between 18,000 to 21,000 properties, the managing director expressed his opinion that it’s “fairly consistent when we look at overall default rates provided by the banking sector – there’s not been in the last five years a real spike in default rates”.
“They’ve been gradually rising, but it’s still from a very, very low base.”
“Basically, under 2 per cent of mortgage properties out there get to that point,” he noted.