CoreLogic Pain and Gain Report

87.7% of homes resell for a profit over March Quarter 2020, while only a minor portion of resales at a loss attributed to COVID-19 shows the latest report

This edition of the Pain and Gain report analyses approximately 72,500 sales that took place over the first quarter of 2020. It highlights how many of these sales made a nominal loss or gain relative to the previous sale.

Nationally, the portion of profit-making sales in the March quarter fell to 87.7% from 88.7% in the December quarter. The total value of gross profit derived from resold dwellings was $19.8 billion. This is down 12.0% from the $22.5 billion gained over the December 2019 quarter, though substantially higher than the $14.3 billion in profit making sales over March 2019 when housing the housing market broadly remained in a downturn. Losses totalled $908.6 million in the March quarter, up from $766 million in the December 2019 quarter.

Eliza Owen, head of research on the latest pain and gain results“There has been an uplift in the portion of loss-making sales over the March quarter. But despite the potential for some fallout from COVID-19 at the end of the quarter, only a small portion of the loss making sales are a reflection of the onset of the pandemic.”

In the first section of the report, the underlying transaction data shows that the portion of loss-making sales stayed relatively steady with the onset of strict social distancing in late March. This is because the volume of sales has declined, with vendors likely to hold, rather than sell, in a highly uncertain economic period.

CoreLogic estimates of modelled sales volumes suggests that there was a 32.4% decline in transaction activity in April 2020, which then recovered over May and June.

The Pain and Gain results over the second half of 2020 could see an increase in the portion of loss-making sales, but the volume of sales activity may be more subdued, as vendors were less likely to test the market at the height of the pandemic. However, assistance for mortgage holders whose jobs and incomes have been impacted by the pandemic was likely also instrumental in keeping loss making sales low.” said Owen

COVID-19 and loss-making sales

The March quarter does not capture the full extent of the decline in the property market that had resulted from COVID-19, with some of the biggest shocks to real estate transaction activity and the economy concentrated in the June quarter.

However, there was still an impact on the market in Q1. According to a ‘stringency index’ developed by Oxford University, government restrictions in response to the coronavirus, and subsequent dampening of economic activity, increased from mid-march.

The stringency index, which boils down social gathering restrictions, school and business closures and other measures into a single number, shows a significant uplift in the last two weeks of the March quarter.

Over this time, international travel bans were introduced, Australian borders were closed to non-citizens, and licenced premises, restaurants, cinemas, casinos and gyms were closed. From March 25th, open homes and on-site auctions were temporarily banned.

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