Property sellers across regional markets have driven the overall performance of the resale markets during the second quarter of the year, boosting profitability to its highest level in 10 years.
CoreLogic's latest Pain and Gain report showed of the dwelling resales over the June quarter, 91.5% reported a nominal profit gain from the purchase price. This represents the highest level of profitability the report recorded in over a decade.
CoreLogic head of research Eliza Owen said profit-making residential sales have increased for four consecutive quarters already despite the impacts of the COVID-19 pandemic.
In fact, the number of housing resales over the quarter increased by 9% on a quarterly basis.
"This number really does reflect the extraordinary recovery in housing values following a small downswing induced by the initial impact of COVID-19,” Ms Owen said.
The report also noted the following market indicators:
- Median hold period on all resales: 8.8 years
- Median gross resale profit: $256,000
- Median gross losses: -$43,000
Ms Owen said the current market conditions have allowed property owners who were reselling after only two years to record a median return of $123,000.
Those who were cashing in after holding the property for around 30 years could potentially get a median return of $710,000.
"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," Ms Owen said.
Regional markets leading the way
Regional and tree-change markets were the top spots during the quarter, with close to 100% of sellers achieving profit for their resales.
For instance, Victoria's Ballarat SA4 region achieved a record-high rate of profitability with 99.7% of resales achieving gains.
This stellar performance was apparent across regional Victoria, where 98.7% of resales were above the purchase price.
"Impressive 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," Ms Owen said.
Loss-making unit sales still high
In terms of dwelling type, houses remained favourable among buyers, with 94.4% of resale transactions earning a gain during the quarter.
Units, however, still saw a high share of loss-making resales at 15.3%. The CoreLogic report showed that a quarter of these loss-making unit sales were concentrated in three main areas: Brisbane, the Gold Coast, and Melbourne.
It is also notable that the highest proportion of loss-making unit resales were across Perth LGAs, including Cockburn Council where 69.5% of unit resales made a nominal loss.
Profitability starting to slow
Despite the stellar profitability recorded during the quarter, the rate at which housing values are growing is starting to slow which will drag on the momentum in profitability.
Ms Owen said several headwinds should be monitored including affordability constraints, the tightening of credit conditions, and resurgence in listing volumes.
“While profitability is expected to trend higher across Australia in the coming quarters, it is clear that the rate of profit-making resales mirrors the trends we’re seeing in city and regional capital growth rates,” Ms Owen said.
Photo by Oleg Magni on Pexels.
