- Australian home resale profits rise, but short-term losses triple.
- Regional properties see high short-term resales, indicating changing ownership patterns.
- Units remain less profitable than houses, though the gap is narrowing.
Australian home resales have seen profitability rise for the first time in a year, with CoreLogic’s Pain & Gain Report for the June quarter revealing a 40 basis point uptick from the previous quarter to 92.8% of sales. The improved profitability coincided with a 2.8% rise in home values, nationally.
While this appears to be good news, a worrying trend emerged: loss-making short-term resales nearly tripled within a year, swelling from 2.7% a year ago to 9.7%.
Profit-making sales up, but so are loss-making ones
CoreLogic head of research and report author, Eliza Owen, remarked that further investigation into resale performance within a two-year period uncovered more pain for recent home buyers.
“Two years is a significant time period because we are two years on from the height of pandemic-related lockdowns, low interest rates, and have just passed the peak of transitions from low fixed rates to high variable rates,” said Owen.
Rolling quarterly rate of profit-making sales versus rolling quarterly change in Home Value Index (national, dwellings)
“The portion of homes sold within just two years increased by one percentage point to 8.5% over the past year, however, the portion of these short-term resales where the seller incurred a loss has increased more substantially, from just 2.7% a year ago to 9.7% in the June quarter. This suggests more sellers are willing to incur a loss at the moment, which could in part be the result of high interest rates.”
Quarterly short-term resales, national
Owen commented that the profile of loss-making sales did not deviate substantially from overall resales in the quarter.
“Of the loss-making resales held for up to two years, the median loss was $30,000, compared to a median profit of $75,000 for nominal gains within the same hold period. Houses made up 66.0% of short-term, loss-making resales, and 63.3% were in capital cities,” she said.
Owner-occupiers incurred the most significant short-term nominal losses, at 72.1%, compared to the 27.9% sustained by investors, closely mirroring patterns observed in overall resales in the June quarter.
Regional owners headed back to the city
An abnormally high number of short-held regional properties were sold in the year to June 2023; resales within two years comprised 11.1% of total regional resales, rising from the yearly decade average of 7.2%.
Portion of resales within a two-year hold period (based on rolling 12 month resales) – Australia
Owen believed this was evidence that regional owners were leaving their homes behind after a brief tree change or sea change.
“Around one in 10 regional Australian property sales were held for only up to two years,” she said.
“A further breakdown of this data by Statistical Area 4 regions shows some of the highest concentrations of short-term resales were in parts of regional Queensland, including Wide Bay (17.3%), the Gold Coast (15.2%) and the Darling Downs – Maranoa region (14.4%). This suggests that people might be selling up after trying to live, or invest, in more remote regional or lifestyle areas.”
Even though many resales had short holding periods, regions were still profitable for sellers. During the June quarter, 91.9% of regional dwellings held for up to two years experienced nominal gains when resold, higher than the national rate of 90.3%.
Units still less profitable than houses
Zooming out to the bigger picture, profit-making sales have generally been improving.
Owen stated that profit-making sales grew for all dwellings across the country, although unit sellers faced nominal losses from resales about four times greater than house sellers.
Nominal losses in house sales improved, from 3.8% in the last quarter, to 3.5%. The rate of loss-making house sales has stayed comparatively low since the December quarter of 2021, staying under 4.0% throughout.
Rolling three-month rate of loss-making sales – houses versus units, national
“The unit sector has seen a lot more weakness in profitability through the recent housing downturn, with 14.4% of unit resales making a nominal loss, or around 4.1 times more likely than house resales,” Owen said.
“However, the rate of loss-making resales declined 90 basis points from the previous quarter, which has served to narrow the gap in the rate of loss-making sales between houses and units, which had hit a record high in the series last quarter.”
Owen forecasted that profitability would increase in tandem with home values.
“The rate of profit-making sales tends to follow capital growth trends. With home values continuing to rise through July and August, we estimate the level of profitability from resales will also move higher through the September quarter.”