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By Eliza Owen

Sales and profits lift as Australian property market regains momentum | Pain and Gain Report

key takeaways

Key takeaways

CoreLogic analysed approximately 90,000 dwelling resales in Q4 2023 and the incidence of profit-making sales nationally increased to 94.0%.

The number of loss-making resales fell 5.1%, to around 5,500.

The median nominal gain was $310,000 in the quarter, and the total nominal resale profit was $29.9 billion.

The median nominal loss was -$40,000, and the total nominal resale loss was $305 million.

Adelaide remained the most profitable capital city market for the fifth consecutive quarter with just 1.5% of transactions recording a nominal loss.

Brisbane had the highest proportion of profitable house resales at 99.3%.

Perth recorded the biggest reduction in the rate of loss-making sales across the capital cities, declining from 9.6% in the September quarter to 8.4% in Q4.

Houses remain more profitable than units, with 97.0% of houses in the December quarter resold for a nominal profit.

The median hold period of resales across Australia was 9.0 years, up from 8.8 years in the September quarter.

The Australian property market continues to demonstrate sustained resilience, with the rate of profit-making sales and number of transactions increasing in the December quarter.

Approximately 90,000 resales were analysed by CoreLogic in Q4 2023, revealing that 94% of transactions recorded a nominal gain.

The median gross profit also saw an uptick to $310,000, marking an increase across all three metrics compared to the previous quarter’s results.

Rolling Quarterly Rate Of Profit Making Sales Versus Rolling Quarterly Change In Hvi

The upward trajectory aligns with the sustained growth in home values observed throughout the year.

Loss-making resales declined to 6.0% of resales in the three months to December, to a median of $40,000, as the volume of loss-making sales also fell by 5.1% in the previous quarter.

The total nominal profit from resales in the December quarter reached $29.9 billion, an increase from $28.7 billion in the previous quarter.

The improvement in the key metrics of this report really highlights the improving profitability in the housing market since the recovery trend began in early 2023.

We've observed a decline in the number of loss-making sales, which fell to just 5,500 during the December quarter, even as overall transaction volumes increased.

The broad-based increase in profitability and value across the Australian housing market helps to shore up financial stability at a time of stark increases in mortgage costs for some households.

Short-term resale shift

The December data also indicated a slight easing in short-term, loss-making resale conditions.

The portion of resales within a two-year hold period reduced from 7.9% in the September quarter to 7.5%.

However, there was an uptick in resales with a hold period of between two and four years, from 13.3% in the September quarter to 14.0%.

This change reflects homes that were bought in 2020 and 2021, and it turned out to be the most popular timeframe for reselling properties in the quarter.

While a rise might have influenced some of these sales in mortgage rates, it's interesting to note that only 3.7% of homes sold during this timeframe ended up making a nominal loss.

Regional market performance

Regional markets outperformed capital cities in terms of profitability, with 95.5% of resales in regional Australia making a nominal gain, compared to 93.2% in combined capitals.

Portion Of Loss Making Sales Capital Vs Regionals

The increase in profitability was also more rapid across regional markets, indicating a strengthening trend outside major urban centres.

Due to the lingering value added of the COVID-boom, regional markets are looking more profitable than capital cities.

Regional markets typically have lower property prices and a different lifestyle appeal and are outperforming capital cities in terms of profitability potentially due to sustained demand, limited housing supply, and a more favourable cost of living environment.

Most profitable markets

Adelaide remained the most profitable capital city market for the fifth consecutive quarter, with more than 98% of resales making a nominal gain in the three months to December.

The Perth market also witnessed significant improvement in line with its high growth in home values, with the rate of loss-making sales reducing to 8.4%, marking its most profitable period since July 2015.

Houses vs. units

Houses continued to deliver higher rates of profit-making sales compared to units, with 97.0% of house resales making a nominal gain, compared to 88.2% of units.

Portion Of Profit Making Sales Houses And Units

However,  the gap in profitability between houses and units narrowed slightly, indicating a potential shift in market dynamics including affordability along with supply constraints.

Underlying land value, scarcity factor and desire for more space through the pandemic have led to a substantially larger rise in house values relative to unit values over the past four years.

The relatively large premium on house values has put them out of reach for many, particularly first-home buyers and lower-income households.

As units become increasingly attractive to buyers, the price gap between detached housing and medium to high-density options will close and profitability of units will improve.

Hold period trends

The median hold period of resales across Australia was 9.0 years in the December quarter, making November 2014 the median initial purchase date for resales through the quarter.

Median Nominal Return From Resales By Hold Period

Number Of Resales By Hold Period

Since that date, national home values have increased 63%.

As noted in previous reports, there are now several markets where the incidence of loss-making sales is associated with relatively short hold periods.

Of the greater capital city and regional house markets, most loss-making sales have been held for less than three years.

Loss-making unit sales were far more likely to be held for longer, due to weaker capital growth performance.

At the national level, loss-making house sales had a median hold period of 5.9 years, whereas loss-making unit resales had a median hold period of 8.4 years.

About Eliza Owen 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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