Residential property vendors nationwide scored nearly $300,000 in gross profits on average in the September quarter – a 2.7 per cent rise from the previous three months, boosted by the rapid increase in home values during that period, CoreLogic’s Pain and Gain report shows.
The portion of profitable home sales also lifted, up by 0.67 of a percentage point to 93.5 per cent of all 86,000 sales. This is above the 90.8 per cent decade average and the highest rate since the three months to July 2022.
The increase in profitability coincided with a 2.2 per cent rise in home values nationally over the three months to September.
CoreLogic head of research Eliza Owen said profits would likely increase further over the December quarter, after home values rose by another 1.4 per cent in October and November.
However, the softer capital growth conditions expected in Sydney and Melbourne could create uncertainty for vendors there, she noted.
“Capital growth trends in Sydney and Melbourne have been fairly flat or falling in November, so profitability could be squeezed by the weaker economic conditions toward the end of 2023 and through 2024,” Ms Owen said.
The portion of profit-making sales increased by 1 percentage point to 91.1 per cent in Sydney, while Melbourne rose by 0.5 to 91.3 per cent.
While overall profitability increased, the share of loss-making properties sold within three years of purchase nearly doubled to 6.6 per cent compared to a year ago.
Properties held for three years or less accounted for one in five loss-making resales and were widespread around the country.
Inner Melbourne had the highest concentration of short-term loss-making sales at 4.1 per cent, followed by Melbourne’s west at 3.7 per cent and Sydney’s Central Coast at 3.6 per cent.
Short-term resellers lost $30,000 on average and more than six out of 10 houses resold within three years of purchase made a loss.
“The increase in short-term resales was happening amid rapidly rising interest costs, and may be a reflection of higher mortgage stress,” Ms Owen said.
“In the coming quarters, short-term resales could stay elevated amid high interest rates, cost-of-living pressures and a loosening in labour markets.
“If people have experienced sticker shock on their mortgage and don’t have many savings buffers to support repayments, they may have to consider proactively reselling.”
Adelaide is the most lucrative market for vendors, with 98.5 per cent of all sales delivering $270,000 median gross profits.
“The Adelaide housing market has seen an incredible realisation in value over the past few years, with values increasing 50.7 per cent since the onset of the pandemic in March 2020,” Ms Owen said.
“This growth has been supported by a relatively low price point, the normalisation of remote work, favourable internal migration, and more recently a strong rebound in overseas migration.”
All homes sold delivered at least $200,000 gross profits on average across Adelaide Hills, Campbelltown, Gawler, Marion, Mount Barker, Norwood Payneham, Prospect and West Torrens, albeit at thin volumes.
Homes in The Hills Shire in Sydney delivered the biggest profits for vendors, at $721,000 on average. Nillumbik in regional Victoria, Burnside in Adelaide and Nedlands in Perth were also highly profitable for vendors, with homes racking up at least $540,000 gross profits on average.
By contrast, Perth city had the highest portion of gross loss-making sales at 52.3 per cent of homes selling lower than purchase price. Melbourne city followed with 41.1 per cent making a loss, and Darwin with 35.2 per cent.
In Sydney, nearly a quarter of vendors in Ryde and Burwood made a loss of $55,000 and $34,500 on average respectively.
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