Property resale profits lowest since 2013

According to CoreLogic’s quarterly Pain & Gain Report, 89.8 per cent of Australian homes sold throughout the second quarter to June 2018 (2Q18) enjoyed resale profit gains, totalling $15.7 billion.

However, national resale gains were down from 90.1 per cent on the previous quarter and 91.1 per cent over the second quarter of 2017. The share of retail gains over the quarter was the lowest it has been since October 2013.

Accordingly, over the June quarter, 10.2 per cent of residential properties resold at a price lower than the previous purchase price, with total realised gross resale losses of $469.4 million.

Across Australia’s capital cities, resale gains dropped to 90.6 per cent in the quarter to June 2018, falling from 91.3 per cent in the previous quarter and 92.7 per cent year-on-year. Resale gains in 2Q18 were the lowest they’ve been since March 2013.

Hobart and Canberra were the only two capital cities in which the share of resales at a loss was lower year-on-year.

According to the report, the majority of Australia’s $15.7 billion in resale profit was generated by Sydney (32.0 per cent) and Melbourne (27.4 per cent), which CoreLogic said reflected both the higher housing cost and strong property value growth in each city over recent years.

Sydney and Melbourne accounted for 11.2 per cent and 7.9 per cent of the total nationwide resale losses over the quarter.

Conversely, the proportion of houses resold at a profit across the combined regional markets was reported at 89.7 per cent in 2Q18, higher than the 89.5 per cent at the end of the previous quarter and the 89.6 per cent over the second quarter of 2017.

Reflecting on the data, CoreLogic head of research Tim Lawless noted: “Capital city properties being resold remain more likely to sell for a profit than those in regional markets, but over the past three months the gap has narrowed due to a decline in resales at a loss in regional markets and an increase across the combined capital cities.”

The research also revealed that houses were more likely to sell at a gross profit than units, with 91.5 per cent of houses and 85.2 per cent of units recording a gross profit resale.

However, both houses and units recorded a fall in profit-making resales over the quarter, with resale gains for house down from 92.6 per cent year-on-year, and resale gains for units down from 87.3 per cent year-on-year.  

“Houses consistently record a higher proportion of resales at a profit than units,” Mr Lawless continued.

“This may be attributed to the underlying land value of detached houses, which is a significant part of the overall value. But it’s also because unit markets can be more prone to oversupply than house markets.”

The research also found that investors were more likely to resell their properties at a loss than owner-occupiers. Over the second quarter of 2018, 9.8 per cent of owner-occupied properties sold at a loss compared to 10.1 per cent for investor-owned properties.

According to CoreLogic, over the June 2018 quarter, houses that resold at a loss had typically been owned for 6.6 years, while those resold at a profit had been owned for 9.2 years. In addition, units resold for a loss had typically been owned for 6.9 years while those resold for a profit had been owned for 7.8 years.

CoreLogic also reported that properties being resold at a loss in the major mining regions remained at heightened levels, with six regions linked to the resources sector recording at least 40 per cent of all resales at a loss over the quarter.

[Related: Housing market ‘broken’ for aspirants]