Australian property sellers cash in on highest level of profitability in a decade

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Tight listings, record-low mortgage rates, and Australia’s extraordinary growth in housing values have led to continued strong resale gains for vendors, particularly in the country’s regional and tree change markets.

Eliza OwenCoreLogic’s Pain & Gain Report shows 91.5% of resales during the June quarter recorded a nominal profit-making gain from the previous purchase price, the highest level of profitability in just over a decade.

Nationally, profit-making residential property sales have increased for four consecutive quarters.

The report, which analyses the proportion of housing resales that delivered nominal gains or losses to sellers is based on around 106,000 dwelling resales in the June quarter – a 9% increase compared with the March 2021 quarter.

This number really does reflect the extraordinary recovery in housing values following a small downswing induced by the initial impact of COVID-19.

The typical median hold period on all resales for the quarter was 8.8 years, with a national median gross resale profit of $265,000.

Median gross losses for the same period were -$43,000.

The market’s recent extraordinary growth allowed property owners who were reselling after only two years to pocket a median return of $123,000.

For those cashing in after over 30 years of holding a property, the median return was $712,000.

Such high levels of profitability may start to encourage vendor participation and bring down typical hold periods, especially as major cities navigate a path out of 2021 lockdowns.”

The highest instances of profitability were achieved across regional and tree-change markets, a trend that has continued in 2021.

Regional Victoria’s Ballarat SA4 region, achieved a record high rate of profitability with 99.7% of resales in the June quarter achieving gains.

Such record-high rates of profitability extended to regional Victoria’s entire dwelling market, where 98.7% of resales were above the purchase price.

profitImpressive returns were not confined to just Victoria, as 97.6% of Sydney house resales achieved a level of gain, the highest level of profit-making resales since 1982.

Even markets with relatively elevated levels of loss-making resales saw vast improvement through the June quarter, as the rate of loss-making resales declined -4.6 percentage points across Perth in the June quarter, and -4.7 percentage points across Darwin.

However, profit-making resales weren’t occurring nationwide as pockets of risk and high concentrations of nominal loss were recorded in specific locations.

An analysis of local government area (LGA) housing markets saw a high rate of loss-making resales across inner-city areas such as Perth (63.5%), Darwin (39.3%), and Melbourne (34.8%).

Key findings for Pain & Gain, June Quarter 2021

  • Around 106,000 dwelling resales were analysed for the June quarter Pain & Gain report
  • Of those 91.5% recorded a nominal profit-making gain from the previous purchase price
  • The median hold period of those resales was 8.8 years
  • Property owners who resold after just two years pocketed a median return of $123,000
  • Property owners cashing in after more than 30 years of holding a property, achieved a median return of $712,000
  • 99.7% of residential properties resold in the Ballarat SA4 region in the June quarter achieved gain for the vendors
  • In regional Victoria, 98.7% of all dwelling resales in June made a nominal gain
  • In Sydney, 97.6% of houses sold for a nominal gain, the highest level since 1982
  • Loss-making sales occurred in Perth, Darwin, and Melbourne
  • The main drivers for the record resale gross profits are tight listings and low mortgage rates. Loss-making sales were affected by border closures and weak inner-city rental markets.

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About

Eliza is head Of Residential Research Australia for Corelogic and a respected property market commentator. Eliza holds a first class honours degree in economics from the University of Sydney


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