Record gains come as loss-making sales drop
Australian home sellers are experiencing rising rates of profitability despite slowing market conditions, declining capital growth, and lower clearance rates, according to CoreLogic’s Pain and Gain report for the September 2024 quarter.
The report, which analysed 95,000 resales during the quarter, found that the median nominal gain reached a record high of $295,000 since the series began in the mid-1990s. Loss-making sales were steady compared to the previous quarter, with the median resale loss at $40,000, slightly above the five-year average of $39,000.
The incidence of loss-making resales dropped to 5%, the lowest level since March 2008. Total nominal gains for the quarter reached $33.98 billion, an increase from $33.3 billion in the previous quarter, while combined losses totalled $270 million, down from $292.4 million.
CoreLogic’s head of research, Eliza Owen (pictured above), attributed the strong results to a 0.8% rise in national home values and robust housing demand conditions. She also cited a solid prudential lending environment as a contributing factor.
“A decline in home values is only a problem for sellers if they have issues servicing home loan repayments or need to sell for other reasons,” Owen said. “Otherwise, homeowners can simply hold their properties back until stronger buyer demand returns.”
City market trends
According to CoreLogic’s latest Pain and Gain report, Melbourne recorded the highest rate of loss-making sales among the capital cities outside of Darwin, with 9.9% of resales registering a nominal loss. It was also the only capital city to see an increase in the rate of loss-making transactions, although the absolute number of loss-making sales declined.
Brisbane, on the other hand, emerged as the most profitable capital for the second consecutive quarter. Nearly all (99.4%) of its resales generated a nominal gain, up from 99.2% in the prior quarter. Perth also saw significant improvements, with profit-making sales rising 120 basis points to 96.9%, second only to Canberra’s gains.
Houses outperform units
Houses continued to outperform units in resale results. Only 2.9% of houses sold at a loss compared to 9.4% of units. Units were three times more likely to sell at a loss, representing 33.5% of all resales but 62.1% of loss-making transactions.
The median resale gain for houses was $345,000, significantly higher than the $200,000 median for units. Owen noted that units have historically faced a higher likelihood of losses due to supply dynamics and their appeal as investment properties.
“Investors may be in a better position to sell at a loss because they can offset losses against future capital gains,” she said.
Holding periods and short-term sales
Short-term loss-making sales showed improvement, with the portion of resales held for less than two years declining to 6.3%, down from 7% in the prior quarter. Of those, 6.1% made a loss, a reduction from 6.6% previously.
However, homes held for two to four years — typically purchased between 2020 and 2022 — showed rising loss rates, reflecting increases in interest costs beyond the 300-basis-point serviceability buffer.
“Three years on from mortgage rate lows, the incidence of loss is rising for those who have held between two and four years,” Owen said.
Regional turnaround
Profitability has surged in resource-based regional markets across Central Queensland, South Australia, and Western Australia. In the September quarter, 91.1% of resales in these areas delivered nominal gains, a marked improvement from the December 2018 quarter when almost half sold at a loss (46.1%).
The median nominal gain was highest in Central Queensland at $173,000, followed by $92,000 in South Australia’s Outback region.
Nationally, the median hold period for profit-making sales was 9.1 years, compared to eight years for loss-making sales.
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