Hobart tops the country for property profit

This edition of the Pain and Gain report analyses approximately 98,000 resales of residential property that took place in the three months to December 2020. The results show an increase in the profitability of Australian real estate, with 89.9% of transactions seeing a nominal gain for sellers.

Eliza Owen, Core Logic’s Head of Research said on the latest Pain and Gain report “As property values rose across each state and Territory through the December quarter, buoyed by a cash rate reduction through November, the value of profits also increased substantially. Total gains from resales in the December quarter rose to $31.9 billion, up from $24.8 billion in the previous quarter. Combined losses from resales also shrank from $1.2 billion to $1 billion from the September to December quarter.”

The results are particularly significant given the uplift in sales volumes in the 3 months to December, much of which was driven by an increase in transaction activity across Melbourne. Sales and listings increased remarkably across the city, as the economy emerged from the weakness associated with the extended lockdowns.

Key highlights – December 2020 Quarter

  • Profitability in Australian real estate rose in the December quarter, coinciding with a 2.3% uplift in dwelling values nationally. Total gains from resales in the December quarter rose to $31.9 billion, up from $24.8 billion in the previous quarter. Combined losses from resales also shrank from $1.2 billion to $1 billion from the September to December quarter.
  • The rate of profit-making resales in the December quarter rose to 89.9%, up from 88.3% in the 3 months to June.
  • Profitability in Australian dwelling sales is above pre-COVID-19 levels, where the rate of profit making sales was 87.9% in the three months to February.
  • Across the capital city markets, Hobart had the highest incidence of profit-making sales, at 97.2%. This is up from 96.7% in the September quarter.
  • The lowest incidence of profit making sales across the capital cities was across Darwin, where 51.4% of properties sold for a loss. The rate of loss making sales across Darwin was 48.6%, and although high, has fallen from 50.6% in the September quarter.
  • The higher incidence of profit making sales through the December quarter was off the back of increased sales volumes. CoreLogic estimates that sales volumes increased 23.6% through the December quarter on the three months to September, as well as December quarter sales volumes being 20.4% above the 5-year average.
  • Profitability across both houses and units rose across Australia in the December 2020 quarter. The portion of properties sold at a loss among houses fell from 9.3% in the three months to September to 7.3%, while the portion of loss making unit sales fell from 19.6% to 18.7%.
  • The rate of profit making house sales rose to 92.7%, which is highest level of profitability since the June quarter of 2018.
  • Over the December 2020 quarter, owner-occupiers had a higher incidence of profit making sales than investors. At the national level, owner-occupiers saw a profit on 92.2% of resales, compared with 84.9% among investors.
  • Over the December 2020 quarter, the median hold period of re-sale events across Australia was approximately 8.9 years. For profit making sales, the median hold period was 9.2 years, while loss-making sales were typically held for 6.9 years.
  • The lowest typical hold period associated with a profit making sale was across regional Tasmanian units, where the median hold period on a profit-making sale was 6.7 years.
  • Over the December 2020 quarter, around 33.4% of sales across mining regions had re-sold at a loss, which is down from 37.0% reported in the previous quarter.
  • The December quarter saw largely positive results for real estate sellers across the coastal markets of Australia, following further increases across regional Australian property markets in the three months to December. 5 of the 9 regions measured saw a rate of profit-making sales about 95% through the December quarter. These were Geelong (98.5%), the Mid North Coast (96.3%), the Newcastle and Lake Macquarie region (96.7%), the Richmond – Tweed region (also 96.7%) and the Sunshine Coast (96.3%).
  • Across Greater Melbourne, the rate of profit-making sales increased significantly from 93.0% in the 3 months to September, to 94.3% over the 3 months to December. This reflected a turn in Melbourne dwelling values, which increased 1.5% as the Melbourne economy came out of lockdowns.

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