Profit-making property sales in June quarter rise to highest level in a decade: CoreLogic

Australian home owners have cashed in on the highest level of profitability in a decade as an overwhelming majority of vendors recorded a profit, new figures show.

More than nine out of 10 sellers sold for a gain during the June quarter, the highest proportion of homes making a profit since 2011, CoreLogic’s latest Pain & Gain Report revealed.

Of the 106,000 resales in the June quarter, the median hold period was 8.8 years, with a national median profit of $265,000.

But the booming property market meant that property owners who were reselling after only two years pocketed a median return of $123,000.

For home owners selling after holding a property for more than 30 years were cashing in a median return of $712,000.

The strong rate of profit-making sales was driven by the same factors as rising house prices, said Eliza Owen, CoreLogic’s head of research.

“It’s the combination of low-interest rates, high levels of household stimulus and government support, high accumulated savings and low levels of listings,” Ms Owen said. “These factors have all increased demand and prices. The chance of making a profit on the resale increases.”

These strong returns could incentivise more sellers to come to market as restrictions were set to ease once double-dose vaccination targets were reached, she said.

“More people might be looking to cash in on the rampant capital growth we’ve seen in the past year.”

Regional and tree-change markets had the highest proportion of profit-making sales, with Victoria’s Ballarat region recording the highest rate of profitability: 99.7 per cent of sellers made a gain.

“That was followed by Bendigo and the La Trobe and Gippsland region at 99 per cent [of resales making a profit],” Ms Own said.

“The biggest cohort of migration from capitals to regionals has been in the 65 years and over.

“That suggests the nature of disruption of the workforce may have triggered more early retirement and spurred on more of a tree-changer demand,” she said.

Owner-occupiers and houses were more likely to make a gain compared to investors and units, mirroring the skewed demand for bigger homes and with it, higher prices, the report found.

While the rate of loss-making sales dropped for houses and units, it was substantially higher for units.

In the three months to June, 15.3 per cent of units sold for a loss, down from 16.5 per cent in the previous quarter.

Meanwhile, just 5.6 per cent of houses made a loss in the same period, down from 6.6 per cent the previous quarter.

In Sydney alone, 97.6 per cent of houses sold for a gain, the highest level since 1982.

“Areas that had really high portions of loss-making sales were generally concentrated in resources markets as well as inner-city local governments areas,” Ms Owen said. “Loss-making sales were characterised by investor-owned apartments.”

These areas had not only an oversupply in units but a fall in demand for rentals as well, the combination resulting in a higher rate of loss-making sales.

Almost a quarter of loss-making unit sales (23.9 per cent) were concentrated in the three local government areas of Brisbane City Council, the Gold Coast City Council and Melbourne City Council.

Despite inner-city regions of Melbourne and Brisbane seeing high volumes of loss-making unit sales, the highest rate of loss from unit resales was in Perth local government areas, where 69.5 per cent of unit resales sold for a loss.

The profitability outlook for sellers could slow down as house price growth loses steam, Ms 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,” Ms Owen said.

“We’re monitoring a number of headwinds that may drag on, or even reverse housing market growth in the medium to long-term, including affordability constraints, a tighter credit environment, a resurgence in listings volumes, and some economic factors including a slowdown in the resources sector.”