Almost 90% of residential resales making a profit: CoreLogic's Cameron Kusher

EXPERT OBSERVATION

Almost 90% of individual residential properties re-sold in Australia during the March 2018 quarter attracted a gross profit.

Vendors pocketing a total of $14.819 billion, the majority of which was generated in Sydney and Melbourne.  

The latest CoreLogic ‘Pain and Gain Report’ delivers quarterly insights into the performance of re-sold properties across Australia.

If relatively few properties are re-selling at a loss (pain) it generally indicates a stronger housing market whereas when a higher proportion of properties are re-selling at a loss it indicates weaker local housing market conditions.  

The report’s topline result for the March 2018 quarter is good, the vast majority of properties reselling at a gross profit, however the percentage that did so (89.8%), was actually the weakest quarter for profit making residential re-sales since the three months to October 2013.

By comparison, the quarter previous to that (ending December 2017) saw a more favourable 91.1% of all properties resold for a profit.  

Even a year prior to that, (the quarter ending December 2016), recorded a better result than March 2018, with 90.7% of properties resold for a profit.

Houses Vs. Units

Houses outperformed units across Australia, including across the combined capital city and combined regional markets.  

Melbourne units were 10 times more likely to re-sell at a loss than houses, a trend replicated in Brisbane (nine times) and Canberra (eight times).

Sydney and Hobart are the only regions where a greater proportion of units re-sold for a profit over the quarter than houses.   

While there was a distinct gap between the performances of houses vs. units (houses re-selling at a gross profit were recorded at 91.4%, compared to just 85.7% for units), both houses and units recorded a fall in profit-making re-sales over the March quarter.

Capital Cities Vs. Regions 

Capital city properties being re-sold remain more likely to sell for a profit than those in regional markets, but the gap has narrowed over the past three months.

Over the March 2018 quarter, 91.1% of capital city properties re-sold for a profit (down from the previous quarter’s 92.8% and also down against a year earlier (92.6%).

In fact, the share of profit-making Capital city re-sales over the March 2018 quarter was the lowest it’s been since March 2013.  

Across the combined non-capital city markets, 88.0% of re-sales were at a profit, a slight decline from 88.3% over the previous quarter but up from 87.4% over the same period in 2017. 

Most of the strength in regional markets is being driven by areas close to capital cities such as Sydney, Melbourne and Brisbane, as well as some coastal markets, while mining regions continue to record heightened levels of re-sales at a loss.

Gains

The total value of re-sales gross profits for the March 2018 ($14.819 billion) was driven Sydney and Melbourne (30.6% and 26.1% of total national profits respectively).

Propelling these results are both the higher cost of housing in Sydney and Melbourne, plus strong growth in dwelling values over recent years which have resulted in substantial profits.

As a comparison, these two cities accounted for just 8.8% and 7.8% of the total value of losses nationally over the quarter.  

When analysing regions with the lowest proportion of re-sales at a loss, the data now shows that some of regions surrounding Sydney and Melbourne are recording even fewer re-sales at a loss than the capital cities themselves.  

Pains

For the March 2018 quarter, $428.1 million in realised gross losses were recorded from resales.  

Regions with the highest share of losses nationally were Perth (22.9%) and regional Qld (22.0%). 

Over the first quarter of 2018, the proportion of re-sales at a loss across each capital city was recorded at, 2.4% in Sydney; 4.0% in Melbourne; 10.0% in Brisbane; 8.2% in Adelaide; 28.9% in Perth; 1.6% in Hobart; 35.6% in Darwin and 7.9% in Canberra.   

The instances of loss-making re-sales increased over the March 2018 quarter relative to the previous December 2017 quarter in all capital cities other than Hobart.

When comparing lossmaking re-sales to a year earlier, there were fewer res-ales at a loss in Melbourne, Hobart, Darwin and Canberra, with all other capital cities having recorded an increase. 

Five regions (all of which are linked to the resources sector), recorded at least 40% of all resales at a loss over the quarter.

It should be noted that in many of these regions the share of losses is now lower than at the market peak, however instances of loss remain elevated; a reflection that housing values remain well below their peaks in these areas.