Houses vs. Units | CoreLogic Pain and Gain report

The most recent edition of Corelogic’s Pain and Gain report analyses approximately 52,000 re-sale events over the June 2020 quarter to see who’s made money on their property transaction and who has not.

The profitability in house and unit assets declined in the June quarter.

House Vs UnitsThe portion of loss making sales in houses was 10.4%, up from 9.5% over the March quarter.

Unit profitability fell, with loss making sales reaching 20.7% in the June quarter, up from 19.8% over the three months to March.

The differential between loss making proportions across houses and units was 10.4 percentage points in the 3 months to June.

This was steady on the March quarter, as both house and unit profitability eroded 90 basis points.

Key Findings

  • The June quarter showed a severe negative economic shock across GDP, inflation and employment figures, so the pain and gain results for this period are of particular interest.
  • However, the portion of loss making sales nationally rose only a little in the June quarter, increasing 50 basis points to 12.8%. The number of sales dropped more significantly than
  • Nationally, gross profits for the June quarter totalled $13.9 billion, down substantially from the $19.8 billion observed in the previous quarter. The total loss incurred was also less in the June quarter, down from $908.6 million, to $660
  • This was expected, as mortgage repayment deferrals have reduced the incidence of distressed sales, and kept stock level low, which may have supported dwelling prices.
  • Nationally, houses had a higher rate of profit making sales nationally (89.6%) than units (79.3%).
  • Investors endured a higher incidence of loss making sales (18.0%) than owner occupiers (11.1%).

The portion of loss making sales across houses and units nationally is shown below.

Cl4

Proportion of total resales at a loss/gain, houses vs. units, June 2020 quarter

Houses Units
Region Pain Gain Pain Gain
Sydney 6.3% 93.7% 12.8% 87.2%
Rest of NSW 5.9% 94.1% 7.9% 92.1%
Melbourne 2.9% 97.1% 15.4% 84.6%
Rest of Vic. 2.9% 97.1% 3.3% 96.7%
Brisbane 6.4% 93.6% 43.0% 57.0%
Rest of Qld 16.4% 83.6% 27.6% 72.4%
Adelaide 6.8% 93.2% 20.1% 79.9%
Rest of SA 15.9% 84.1% 26.4% 73.6%
Perth 32.2% 67.8% 57.5% 42.5%
Rest of WA 39.8% 60.2% 61.3% 38.8%
Hobart 3.3% 96.7% 3.1% 96.9%
Rest of Tas. 3.8% 96.2% 11.3% 88.7%
Darwin 43.1% 56.9% 71.7% 28.3%
Rest of NT 24.2% 75.8% 36.8% 63.2%
Australian Capital Territory 4.2% 95.8% 25.8% 74.2%
National 10.4% 89.6% 20.7% 79.3%
Cap city 9.9% 90.1% 21.6% 78.4%
Regional 11.0% 89.0% 17.9% 82.1%

Over time, the profitability of the unit segment has been eroded relative to houses.

This is likely due to the relatively high volume of unit development that has taken place since 2013.

ABS dwelling completion data suggests unit construction peaked around the December quarter of 2016, when 29,141 units were built nationally.

This was an increase of 64.3% year-on-year.  Australia Property

Since then, unit supply has gradually trended down, but it still elevated relative to decade averages.

As oncoming supply further dampens the unit segment during a time of low demand, this segment is particularly susceptible to continued declines in profitability.

Despite houses generally showing higher levels of profitability, the portion of loss making sales in houses reached a 7-year high in the June 2020 quarter.

Over the June quarter, the median profit on resales was $229,873 for houses, and $142,000 for units.

The median loss among unprofitable resales was -$50,000 for houses and -$46,000 for units.

Of the capital city markets, the highest portion of loss making unit sales was across Darwin, where 71.7% of units sold for less than the previous sale price. Melbourne property skyline

This was across roughly 100 resale observations.

The median loss on units across Darwin was $155,000 in the June quarter.

The highest volume of loss making unit sales broke a recent trend, in which the ‘Rest of Queensland’ greater statistical area would usually account for the most loss making unit sales.

Instead, Greater Sydney saw the highest volume of loss making unit sales, at 477 in the June quarter.

When assessing the data by more granular regions however, the Brisbane Council had the highest volume of loss making unit sales (312), followed by the Gold Coast (137).

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Tim Lawless

About

Tim heads up the Core Logic RP Data research and analytics team, analysing real estate markets, demographics and economic trends across Australia. Visit www.corelogic.com.au


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