Australian property resales reached their highest rate of profitability since July 2010 in the first quarter of the year thanks to consistently rising home values outweighing economic challenges and persistently high mortgage rates.

CoreLogic's Q1 2024 Pain & Gain report analysed approximately 85,000 resales over the period, revealing 94.3% of transactions recorded a nominal gain.

CoreLogic’s Head of Research Eliza Owen said the number of transactions increased 8.5% from the same quarter of last year while national home values rose 1.7% in the quarter.

She noted the weaker median gross profit of $265,000 - down from a revised $268,000 made by those vendors who sold in the final quarter of 2023 – was partly compositional, with a higher portion of unit resales through the start of the year than in the previous quarter.

“Despite the slight drop off in the median nominal gain, the rate of sellers making a profit has improved over the year and is the highest in Australian dwelling sales since July 2010,” she said.

“This increase in the profitability rate across the Australian housing market helps to shore up financial stability for many property owners at a time when higher mortgage costs are starting to take their toll on household budgets.”

While the rate of profit-making sales was up, the value of combined profits was down from the December quarter, in part due to the seasonal decline in sales. CoreLogic estimates the combined value of nominal gains from resale was $28.6 billion in the March quarter, down from $30.6 billion in the December quarter of 2023.

Nominal losses from resales were $278 million in the quarter, down from $302 million in the previous quarter.

Least and most profitable capital cities

Outside of NT, Melbourne had the highest rate of loss-making sales of the capital city markets (at 9.2%, up from 8.9% in the previous quarter). Adelaide and Brisbane were tied for the most profitable cities, with a loss-making sales rate of just 1.6% of resales.

Ms Owen said Perth had shown a remarkable turnaround in the past few years as loss-making sales declined to 6.4% from the 43.8% recorded in the June quarter of 2020.

She said because of the city’s strong metrics - home values up 6.1% in the three months to May, and a median selling time of just 10 days - conditions are heavily in favour of Perth sellers with an additional improvement in profitability expected in the June quarter.

“In the December quarter of last year, Perth managed to improve its position from the second least-profitable capital city for the first time since 2015. The rate of loss-making sales has continued to shrink, and it’s overtaken Sydney and Melbourne,” she said.

“Perth values may have grown rapidly in the past 12 months, up 22.1%, however the median dwelling value is still one of the more affordable cities in the country relative to local incomes.

Short-term resales pass peak

Short-term resales have become an indicator of how households respond to rising interest rates.

Ms Owen said the latest figures suggest the short-term selling for properties owned for two years or less has passed a peak, as the value of housing lending on fixed terms had also passed a peak by March 2022.

“As housing values have risen, the rate of loss-making sales within short-held properties has also declined,” she said.

“Interestingly though, properties held for two-to-four years have made up a relatively high portion of resales in the March quarter at 15.3%, which may be influenced in part by the expiry of three-year fixed terms.”

Regional market performance

The rate of profit-making sales in Q1 was higher in the combined regions than in capital city markets, which has been the case each quarter since the three months to May 2020.

Of the resales in regional Australia through the March quarter, 95.6% made a nominal gain, compared to 93.5% of resales in the capital city markets.

“The rate of loss-making sales in regional Australia has structurally shifted lower from a pre-COVID decade average of 13.0% to 7.2% since March 2020,” Ms Owen said.

“This shift is driven by increased demand in lifestyle regional markets, the affordability of major regional centres compared to capital cities, and a recovery in resource-based regional markets.”

Houses vs. Units

Across Australia, houses continued to deliver higher rates of profit-making sales compared to units. The Pain & Gain report shows 97.1% of house resales made a nominal gain in the March quarter, compared to 89.0% of units.

Ms Owen said the gap between house and unit profits had roughly tripled in the past four years with nominal gains from houses sitting 85.5% higher than units in the March quarter of 2024.

The median nominal gain for houses in the March quarter was $320,000, compared to a median nominal gain for units of $172,500.

“The enormous capital gain windfalls afforded to detached house owners over the past few years is another illustration of the ‘haves’ and ‘have nots’ of real estate,” Ms Owen said.

“Underlying land value, scarcity, and a desire for more space through the pandemic has helped drive buyer demand and in turn led to a more substantial rise in house values relative to unit values.

“But affordability and supply constraints are kicking in and as a result units are becoming increasingly attractive to those who have been priced out of certain markets. Slowly that gap between the price of detached housing and medium to high density options should decrease and with that profitability of units will improve.”

Hold period trends

The median hold period of resales across Australia was 8.8 years through the March quarter, down from 9.0 years in the December quarter of 2023, and 8.9 years in the March quarter of 2023.

Ms Owen said median hold periods have generally moved lower during home value upswings, as more profit-making resales of properties held for shorter periods increases.

The latest data shows that the median hold period for resales places the median initial purchase date in May 2015, during which time national home values increased by approximately 58.2% through the end of March 2024.

“Most markets have seen a sizable lift in home values in the last eight years, however it may surprise people to know there are still markets where values have softened through this period, this includes Darwin and the rest of the Northern Territory,” she said.

“Time in the market rather than timing the market is critical to maximising returns for most resales. Generally, the longer a vendor holds a property the higher the returns with vendors selling after 30 or more years attracting the largest median gain of $780,000.”

Key findings for Pain & Gain, March Quarter 2024

• CoreLogic analysed approximately 85,000 dwelling resales in Q1 2024.
• The incidence of profit-making sales nationally increased to 94.3%.
• The median nominal gain was $265,000 in the quarter, and the total nominal resale profit was $28.6 billion.
• The median nominal loss was -$40,000, and the total nominal resale loss was $278 million.
• Adelaide and Brisbane shared top honours for being the most profitable capital cities with 98.4% of resales achieving a nominal profit respectively in the March quarter.
• Melbourne became the second-least profitable market of the capital cities behind Darwin.
• The median nominal gain for houses was 85.5% higher than for units in the March quarter, with 97.1% of house sales in the period resold for a nominal profit.
• The median hold period of resales across Australia was 8.8 years, down from 9 years in the December quarter.

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