Australian homeowners have cashed in on the highest level of profitability in a decade as an overwhelming majority of vendors recorded a profit according to Corelogic's Pain & Gain Report.
More than nine out of 10 home sellers sold for a gain during the June quarter, a 9 per cent increase compared to the first quarter of the year and the highest proportion of homes making a profit since 2011.
Obviously the strong results are on the back of our surging property markets, so this result is not surprising.
CoreLogic analysed approximately 106,000 resales of residential real estate nationally, where the latest sale date of the property occurred in the June 2021 quarter to see the proportion of housing re-sales that delivered nominal gains or losses for sellers.
For properties sold over this period, 91.5% of sales resulted in a nominal gain on the previous sale price.
This is up from 90.6% in the March quarter and is the highest level of profitability since the three months ending May 2011.
However, the pace at which profitability is rising across the Australian housing market has started to slow.
This can also be seen in the chart below, with shows a slight flattening in the trend of profit-making sales.
The increase in the rate of profit-making sales has coincided with a continually strong environment for housing demand, which is also reflected in an uplift in sales volumes.
Nationally, the number of resales analysed lifted around 9% in the June quarter compared with the initial count of resales for March.
The number of profit-making sales observed for the quarter is approximately 97,000, up around 10% from the previous quarter.
The nominal gains yielded from resales through the June quarter currently sit at $39.4 billion, up 12.6% from the previous quarter.
However, the loss on sales totaled $1.1 billion, which also increased in the previous quarter.
Typical hold periods on all resales were 8.8 years through the quarter, with median change in the initial and resale value sitting at $236,000 in the period.
Nationally, the median profit on resales was $265,000 in the three months to June, while median losses were -$43,000.
The trend in profitability mirrors the trend in capital growth across Australian dwellings.
In the 12 months to June, housing values have risen 13.5%, which is an extraordinary rise off the back of a decade average annual appreciation of 3.2%.
However, looking at quarterly growth rates, the pace of value increases has also been slowing.
Australian housing values rose 6.1% in the June quarter, down from 7.0% in the three months to May.
A comparison of rolling 3-month growth in Australian housing values against the rate of profitmaking resales is shown below.
The chart shows an uplift in the incidence of nominal gains rising with increases in the value of housing.
Given the pace of quarterly capital growth has slowed further through to the three months to August (at 5.2%), the rate of profit-making sales will likely also increase more slowly when the September results are analysed.
For the fifth consecutive quarter, the rate of profit-making sales across regional Australia was higher than across the combined capital cities.
However, the rate of profit-making sales in regional Australia was 91.54%, just seven basis points higher than what was observed across the capital cities (91.47%).
This is down from a recent peak of 150 basis points in the September 2020 quarter.
It also mirrors capital growth trends, which have seen a narrowing in performance between regional Australian and capital city dwellings on a monthly basis since early 2021.
The rate of profit-making sales in the capital cities rose more sharply through the June quarter, up 103 basis points from 90.4% in the March quarter, compared to an 81 basis point rise from 90.7% across the combined regions.
Across the greater capital cities and ‘rest of state’ markets, the June quarter saw an increase in profitability across 12 of 15 markets.
The rate of loss-making sales increased across Melbourne, Hobart, and regional Tasmania in the quarter.
A summary of the quarterly change in loss-making sales rates is presented in the table below.
The rate of loss-making sales across Melbourne rose to 5.4% in the June quarter, up from a revised 5.1% in the previous quarter.
Despite the increase, Melbourne had the third-lowest rate of loss making sales of the capital cities, behind Hobart (2.7%) and the ACT (4.6%).
Melbourne also had the sixth-lowest rank of loss-making sales nationally.
The largest increase in the rate of loss-making sales was across Hobart, where the portion jumped 1.3 percentage points, albeit off a low base of 1.4%.
Despite the increase in the portion of loss-making sales across Hobart, it has maintained the lowest rate in loss-making sales across the capital city markets since January 2018.
However, for the past two quarters, the lowest incidence of loss-making sales nationally has been across regional Victoria.
Across regional Victoria, the proportion of loss making sales was just 1.3%, down a further 30 basis points on the previous quarter.
The rate of loss-making sales in this region was at a record low through the June 2021 quarter.
Notable reductions in the incidence of loss-making sales continued across the resource-based markets of Australia.
The rate of loss-making sales fell over 4 percentage points across Perth, Darwin, and regional NT in the June quarter.
The biggest drop was across Darwin, where the rate of profit-making sales across all dwelling resales rose to 66.1% in the June quarter.
This is the highest rate of profit-making sales seen in the city since February 2018 and is up from a recent low, where only 45.3% of resales achieved nominal gains in the three months to July 2020.
Across Perth, the rate of profit-making sales is at its highest level since June 2016.
This reflects a continued recovery trend across housing market values in these cities.
The June 2021 quarter marks the fourth consecutive increase in the rate of profit-making sales nationally.
This follows the rate hitting a recent low of 86.0%, amid stage 2 restrictions through the June 2020 quarter.
Despite the incidence of COVID-19 lockdown conditions disrupting employment through the second half of 2021, it is also unlikely that this would coincide with an increase in loss-making sales.
This is because property values continue to rise broadly across Australia, fuelled by resilience in consumer sentiment, ultra-low mortgage rates, subdued levels of available listings, and the reintroduction of government household support and loan repayment deferrals.
As with previous periods of lockdowns, sales and listings activity have slowed markedly through the September 2021 quarter.
This means the volume of profit-making sales may decline, even as the rate of profitability remains relatively steady.
It is expected that the incidence of profit-making sales will decline when housing market performance starts to soften.
This would likely occur off the back of a change to lending conditions, whether through increases in the cash rate, or the introduction of macro-prudential measures around mortgage lending.
You might be interested:
Pain and Gain Report September 2021: National review
Pain and Gain Report September 2021: Houses vs. Units
Pain and Gain Report September 2021: Sydney
Pain and Gain Report September 2021: Melbourne
Pain and Gain Report September 2021: Brisbane
