As the market across Australia begins to cool as we enter a period of rising interest rates, it seems appropriate to look at the latest round of capital gains data released by CoreLogic in their quarterly Pain and Gain Report released earlier this month. 

The figures cover sales in the December quarter of 2021. The most notable aspect of this data isn’t just the significant wealth people have generated by owning property. It’s the high median hold periods amongst profitable sales compared to loss-making sales.

Let me give you an example. The council area with the highest median capital gain in Sydney during the quarter was the Hills Shire in Sydney’s north-west at $740,000.

Amongst all the owners who sold their homes or investment properties for a profit during the quarter, the median hold period was 7.7 years. Amongst the owners who sold at a loss, the average hold period was 4.4 years.

This is a trend throughout the data nationwide. Profitability or capital gains in real estate relies on holding your property for the long term.

This is an especially important message for owners now. As the market cycle commences its recovery from the phenomenal pandemic-induced property boom we have seen across the country, owners have to brace themselves and prepare for the value of their homes to potentially go down.

This will likely only be a reality for people who bought in the past couple of years in Sydney and Melbourne, to start with.

Now is the time for recent buyers to ignore the scare stories in the media, ignore the price data, and simply focus on enjoying your home while the market corrects itself in preparation for the next upswing, whenever that may be. If history repeats itself, this correction will not last too long.

I’ve been through at least six market corrections in the last 40 years of my career in property.

Everyone panics when things slow down or prices come back but if you look at history, these periods do not last long and prices rarely come back more than 8% to 9%. In fact, when interest rates peaked at astronomical levels of 17.5% around 1990, prices only retreated around 10%.

We expect an increase in listing activity now the federal election is over. The fundamentals of the property market remain strong, but if you’re buying now, you must have a long term horizon.

Now let’s take a look at this latest data on capital gains from CoreLogic. The list below shows the council areas that had the highest median capital gain during the December quarter of 2021.

Also noted is the median number of years that the owners who sold for a profit held their properties (‘median hold period’).

Top 3 areas for profitable sales:

Sydney 

1. Hills Shire 

• Median capital gain: $740,000 

• Median hold period: 7.7 years 

2. Hornsby

• Median capital gain: $640,000 

• Median hold period: 9.2 years 

3.Waverley

• Median capital gain: $580,000 

• Median hold period: 9.7 years 

Melbourne 

1. Nillumbik

• Median capital gain: $665,000 

• Median hold period: 12.2 years 

2. Mornington Peninsula 

• Median capital gain: $595,000 

• Median hold period: 8.9 years 

3. Monash 

• Median capital gain: $574,650 

• Median hold period: 11.3 years 

Brisbane 

1. Brisbane 

• Median capital gain: $313,000 

• Median hold period: 9.6 years 

2. Redland 

• Median capital gain: $287,500

• Median hold period: 8.4 years 

3. Moreton Bay 

• Median capital gain: $258,000 

• Median hold period: 7.8 years 

Canberra 

1. Canberra (measured as a whole) 

• Median capital gain: $375,000

• Median hold period: 9.6 years

Hobart 

1. Hobart 

• Median capital gain: $515,000 

• Median hold period: 9.4 years 

2.Kingsborough 

• Median capital gain: $431,000 

• Median hold period: 8.4 years 

3. Clarence 

• Median capital gain: $400,000 

• Median hold period: 8.6 years 

Source: Pain and Gain Report - December Quarter 2021, CoreLogic, published May 2022

Regional areas are continuing to experience significant higher capital gains, however some heat is starting to come out of the market – similar to our big cities. 

We’ve seen a historical regional property boom over the past two years, and now it’s time for some price consolidation and correction to create a new foundation for the next growth cycle. 

The views expressed in this article are an opinion only and readers should rely on their independent advice in relation to such matters. 

For more information including articles, checklists, guides and more visit McGrath’s Insights Centre.

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