Analysis across Australian regions suggested that positive housing market conditions, rather than financial stress, are enabling homeowners to upgrade sooner than expected, according to a PropTrack report.
The share of homes listed for sale that were recently bought, termed quick resales, has risen over the past 18 months. About 13% of homes sold nationally were purchased three or fewer years ago, a significant increase from 9% during the pandemic.
The rise coincided with the increase in interest rates from May 2022, leading some to suggest that this reflects people reassessing the affordability of homes bought at record low interest rates.
“Mortgage repayments have increased by as much as 70% since 2022, on top of strong general cost-of-living pressures,” PropTrack’s Paul Ryan (pictured above) said.
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However, there are other explanations for this trend.
Changes in family or job circumstances, as well as financial improvements like promotions or inheritance, can prompt homeowners to sell and upgrade.
“Some people resell homes quickly because their lives change,” Ryan said. “It could be because they need a bigger home for their family, or to be close to their extended family, or maybe because their job location shifted.”
A significant part of the increase in quick resales is from the large group of 2021 purchasers who are now starting to sell.
The strong market activity in 2021, driven by falling interest rates and pandemic-related living arrangement changes, is now leading to more resales from those who bought less than three years ago.
Many view the housing market as a ladder, where strong home value growth can accelerate the move to the next rung.
This trend is evident in regions with significant home price growth over the past four years, except for Adelaide, which has seen strong growth across the city.
“This relationship suggests that a key driver of resales of homes bought over the past year has been positive financial boosts from exceptionally strong home price growth enabling home upgrades,” Ryan said.
While positive market conditions are a primary driver, financial stress from weaker job markets may also contribute to quick resales.
Regions with higher unemployment rates show a slight increase in quick resales, particularly in Melbourne, where lower home price growth and challenging financial circumstances may be more impactful.
Overall, the rate of quick resales appears to reflect positive financial situations more than financial stress.
Regression analysis indicated that price increases are significantly more important in explaining recent resale proportions across regions.
“The most likely explanation for higher rates of quick resales is that unexpectedly high price growth has enabled home upgrades,” Ryan said.
The PropTrack analysis suggested that, despite the financial challenges from higher mortgage repayments, most homeowners are managing their circumstances well.
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