Australian real estate resilience continued its reign throughout the September 2021 quarter, CoreLogic’s Latest Pain and Gain Report shows.
The for-profit resale rate across Australia rose to 92.4% in the September quarter of 2021, up 50 basis points from the June quarter. The three months to September saw the highest level of profitability in over a decade.
Eliza Owen, Head of Research at CoreLogic, says this is another remarkable result given that this quarter was marked by closures in Sydney, Melbourne and the ACT.
“The increase in the rate of for-profit sales reflects strong capital growth in Australian property markets despite the COVID-induced disruptions to deal activity. The three months to September was the fifth consecutive quarter in the during which the rate of for-profit sales across Australia has increased,” says Ms Owen.
The report analyzed around 99,000 home resale transactions during the period, compared to 106,000 resale events in the June quarter, which Ms Owen said was the result of social distancing restrictions, particularly the inability to physically inspect properties across Melbourne, weighing on deal activity.
The national median nominal gain was $270,000 with total resale profits of $27.3 billion, while median losses were -$37,000, totaling -$368 million. Ms Owen says the combined profit and loss value fell in the quarter, but the decline in total losses was faster.
Earnings by holding periods
“Resales had a typical holding period of 8.8 years, which was consistent with the previous quarter. However, as the market peaks over the next couple of years, this could prompt more resales and we could see the average holding period increase as more owners look to cash in on their long-term gains, says Ms. Owen.
“Properties held for more than 30 years had the highest median gain, just over $745,000. However, the highest nominal gains per year have been made by those at the other end of the spectrum, who have held property for two years or less. The median gain on resales of goods held for less than two years was $120,000.
Pain and gain in parts of Australia
Regional Australia had a higher resale profit rate at 93.1% in the quarter, but the capitals combined also had a fairly high resale profit rate at 91.1%.
Ms Owen said: “Both major regions saw an increase in profitability during the quarter, but regional Australia saw a faster increase in the rate of profit sales, and this trend is expected to continue as the Regional housing growth picked up momentum towards the end of the year.
“Reflecting where we have seen values rise the most during the Covid period to date, Sea Change and Tree Change properties proved to be among the most profitable during the quarter. Of all markets SA4s analyzed across Australia (of which there are nearly 90), the largest share of for-profit sales was in Bendigo at 99.8%, followed by Hume (99.5%), the Sunshine Coast and Ballarat (99.3%).
“The sea shift and shaft shift markets have seen immense price growth in 2021 as the prevalence of remote working amid the pandemic, the relative affordability of regions, and the potential for retirement decisions being made amid labor market disruptions have contributed to high levels of migration to regional Australia through 2021,” says Ms Owen.
Resource-based markets have generally experienced higher levels of loss sales, but are showing the fastest signs of improvement. Across the six major resource markets analyzed, the total incidence of loss sales fell from 32.5% in the June 2021 quarter to 29.2% in the three months to September.
“In addition to low interest rates increasing credit available for housing, increased economic output has led to a sharp increase in commodity prices and mining investment activity, which has supported the economy. employment and housing demand,” Ms Owen said.
“Factors related to the pandemic have exacerbated housing demand in resource-based markets during the year. These factors included restrictions on interstate travel, which in some cases converted “FIFO” labor agreements into resident labor, and the increased desirability of regional markets during the pandemic, which may have attracted residents who are not in the resource sector. »
Houses vs Units
Home resales continued to have a greater chance of a nominal gain (95.0%) than units (86.5%). However, Ms Owen says the gap between home and unit profitability is narrowing.
“As affordability constraints limit the growth of the single-detached market and gradually shift demand towards higher-density housing options,” says Ms Owen.
With home values showing further increases nationwide in the December 2021 quarter, the share of for-profit sales is expected to continue to rise in the coming quarters. However, Ms Owen cautions:
“There are headwinds building up for housing market performance in the months ahead, in the form of higher supply of advertised inventory, normalization of interest rates, constraints on affordability and the possibility of tighter lending restrictions. A decline in Australian property market values would ultimately impact the profitability of resales, especially for recent buyers.
Key results from Pain & Gain, September 2021
• Approximately 99,000 home resales were analyzed for the Pain & Gain report for the September quarter
• Of these, 92.4% recorded a nominal profit gain over the previous purchase price, compared to 87.5% in the September 2020 quarter
• Median nominal gain on resales nationwide was $270,000, while median losses were -$37,000
• The median holding period of these resales remained unchanged from the previous quarter at 8.8 years
• Properties held for more than 30 years posted the highest median total return, just over $745,000.
• Properties held for two years or less had the highest nominal gain per year of $120,000
• Home resales continued to have a greater chance of a nominal gain (95.0%) than units (86.5%), although the gap is narrowing
• Regional Australia had a higher profit rate than Australia’s combined capitals at 93.1% vs. 91.1% respectively
• Homeowners maintained a higher for-profit sales rate nationally (95.5%) than investors (89.7%), but conditions varied across capitals
• Investors in Hobart were the big winners, with 100% of investment home resales making a nominal gain.
This edition of the Pain and Gain report analyzes approximately 99,000 residential property resale events in the September quarter of 2021. For more information or to purchase the report, visit www.corelogic.com.au/reports/pain-and -gain.