Tight listings, record low mortgage rates and Australia’s extraordinary growth in housing values have led to the strongest returns for vendors in more than a decade.
According to the latest Corelogic Pain and Gain report, more than 90 per cent of homes sold in the June quarter transacted at a profit—a 9 per cent increase compared to the first quarter of the year.
The rate of growth in profits mirrors a 13.5 per cent increase in housing values in the 12 months to June with the median profit being pocketed on resales for homes typically held for 8.8 years now $265,000, and median losses $43,000.
But the recent post-pandemic surge now meant that owners were reselling after only two years at a gain of $123,000.
The report, which analyses the proportion of housing resales that delivered nominal gains or losses to sellers, is based on 100,000 dwelling resales in the quarter.
The highest instances of profitability were achieved in regional and tree-change markets, a trend being fuelled by stay-at-home orders prompting buyers to search in areas where they can find more spacious family homes with backyards or easy access to the beach.
Houses, proportion of total resales at a loss/gain
Units, proportion of total resales at a loss/gain
Corelogic head of residential research Eliza Owen said that while nationally, profit-making property sales had increased for four consecutive quarters, a number of headwinds were combining to potentially drag on, or even reverse growth in the medium term.
“While profitability is expected to trend higher across Australia in the coming quarters, it is clear that the rate of profit-making resales mirrors the trends we’re seeing in city and regional capital growth rates,” Owen said.
“As the rate of increase in values slows, as we have started to see each month since April, so too will the momentum in profitability.
“We’re closely monitoring affordability constraints, a tighter credit environment, a resurgence in listings volumes, and some economic factors including a slowdown in the resources sector.”
In Victoria, Ballarat led the way, achieving a record high rate of profitability with 99.7 per cent of resales in the quarter achieving gains.
Other top performers included the Richmond-Tweed region, where dwellings sit 29.5 per cent higher over the year; the Sunshine Coast, where values rose 27.6 per cent; and the Launceston and North-East housing market, where dwelling values are up 26.3 per cent.
Meanwhile, inner-city markets have gone into overdrive with 97.6 per cent of houses in Sydney sold at a profit—an increase of 8 per cent on the previous month to now be at the highest level of profit-making gains in almost four decades.
Average profits for sales in regions such as Ku-ring-gai, Mosman, Woollahra and the Northern Beaches are now topping $1 million.
In Melbourne, the highest profits were achieved in Bayside, Nillumbik and Boroondara while loss-making sales were affected by border closures and weak inner-city rental market.
Brisbane, where profit-making resales have been above 90 per cent mark since January 2018, experienced an 18 per cent surge across its unit market buoyed by buyers arriving from Victoria and NSW.
Despite the relatively rapid improvement in profitability across units, the rate of loss-making sales nationally remains around 2.7 times higher than in the house segment.
Through the quarter, there were close to 4900 loss making-unit sales, equating to 15.3 per cent of all units sold.
The result is down from 16.6 per cent in the previous quarter, and 21 per cent from the same quarter last year.
“Weaker profitability in units relative to houses comes off the back of changes to unit demand, coupled with an increase in unit supply in recent years,” Owen said.
“There are early signs that the pace of capital growth in house values is currently slowing faster than in the unit segment.
“This may be a result of rising housing affordability pressures in the detached house segment, where combined capital city house values were sitting 32.2 per cent higher than units in August.
“The increased price pressures across the house market may see more buyers pivot to the unit segment in the coming months, and lead to an increased incidence of profit-making sales across units.”
Almost a quarter of loss-making unit sales were concentrated in central Brisbane, the Gold Coast and the Melbourne CBD.
Despite inner-city regions of Melbourne and Brisbane experiencing high volumes of loss-making unit sales, the highest proportion of loss from unit resales was in Perth, particularly Cockburn, where two-thirds of units were sold at a loss.