Distressed sales fall to pre-pandemic levels

Distressed sales peaked in autumn in all cities except for Melbourne, where distressed listings peaked at 1.1 per cent in September.

Come October, distressed listings across most capital cities were at their lowest level since the COVID-19 pandemic hit, with sellers in a better position than in February even with some initial six-month mortgage holidays coming to an end.

In Sydney, distressed listings were recorded at 1.7 per cent, down from 2.0 per cent in February. Meanwhile, Melbourne recorded a 0.8 per cent distressed listings, which is the same level it saw in February.

Brisbane also saw a significant decrease from February’s 3.2 per cent to 2.5 per cent in October, while Perth is now at 1.5 per cent from 2.3 per cent in February – recording the biggest improvement over the nine-month period.

Canberra, Adelaide and Darwin also saw declines in distressed listings, with rates currently sitting at 0.8 per cent, 0.4 per cent and 2.8 per cent, respectively.

Hobart was the only city where distressed listings remained slightly high, with 0.2 per cent of listings classified as distressed compared with 0.1 per cent in February. Still, it had the lowest level of distressed sales of all the capitals.

According to Domain senior research analyst Dr Nicola Powell, the short window between the first economic impacts of COVID-19 and the introduction of government support measures and mortgage deferrals ultimately limited urgent sales.

“This reflected buyers trying to offload property quicker amid the city’s ban on private property inspections, a ban which was lifted in late September,” Dr Powell said.

However, Dr Powell said that ongoing support measures could be masking the true financial losses facing home owners.

While repayments resumed on almost half of deferred mortgages by mid-October, the Australian Banking Association found that there were still some 270,000 deferred home loans.

According to Dr Powell: “Any significant increase in distressed sales would only occur when those home owners had to resume repayments – and even then the banks would do all in their power to prevent forced sales.”

The most at-risk regions would be those with greater levels of negative equity such as parts of Western Australia, Queensland and the Northern Territory, Dr Powell said.

“In areas such as Hobart, where wages were low and prices rose rapidly in recent years, there could be more home owners who had overextended themselves.”