Hobart properties lead the way for profit

CoreLogic’s Pain and Gain report for the September quarter 2020 analysed approximately 72,000 residential property resale events over the three months to September.

According to the report, the proportion of resales that made a profit in the three months rose to 88.1 per cent (from 87.2 per cent), to $24.8 billion in profits.

However, the amount of losses also deepened on non-profitable sales, from -$885 million in the June quarter to -$1.2 billion in September. 

More investment properties were also found to have sold for a loss compared with that of owner-occupier sales (17.1 per cent compared with 10.4 per cent).

Property in Hobart had the highest rate of profit at 96.6 per cent of resales, retaining the lead it has held over all other Australian capital cities since 2018.

However, regional Victoria proved to be the most profitable ‘rest of state’ at 97.5 per cent, according to the report.

Indeed, the portion of profit-making sales increased more rapidly across the regions than capitals, CoreLogic found.

Nearly 90 per cent (89.2 per cent) of regional properties sold for a profit in the September quarter (up 150 basis points), while the rate of profitability across capital city markets expanded to 87.2 per cent, according to Eliza Owen, CoreLogic’s head of research Australia.

Ms Owen commented: “Each of the greater capital city markets, with the exception of Melbourne, saw an increase in the rate of profit-making sales over the September quarter.

“Coastal regional markets were also particularly profitable for sellers, with profit-making sales representing over 95 per cent of resales across six major coastal markets: Geelong, Illawarra, the Mid North Coast, the Newcastle Lake Macquarie region, the Richmond Tweed region and the Sunshine Coast. 

“The Sunshine Coast hit a record-high rate of profit-making sales in the September quarter at 96.4 per cent,” she added.

The report also found that there was generally a higher rate of return for houses ($225,000) than units ($125,000).

Ms Owen stated: “Profitability across both houses and units rose across Australia in the September 2020 quarter. 

“The portion of properties sold at a loss among houses fell from 10.2 per cent in the three months to June to 9.6 per cent, while the portion of loss-making unit sales fell from 21.4 per cent to 19.6 per cent.”

The differential between house and unit profitability narrowed to 10 percentage points in the September quarter, down from 11.2 percentage points in the three months to June, which was a result of unit profitability rising faster than that of houses. 

Looking ahead, Ms Owen said the Australian housing market is expected to improve further in the coming months. 

“With record-low mortgage rates, a faster than expected economic recovery and relatively low cases of COVID-19, profitability is tipped to trend upwards over the coming quarters,” she concluded.

[Related: Sellers’ pain and gain revealed]