There was an increase in the profitability of Australian real estate in the three months to December 2020, with almost 90 per cent of sales resulting in a gain, according to the latest CoreLogic Pain and Gain Report.
The quarterly report, released today, analysed 98,000 resales of residential properties that took place in the final three months of 2020, with data showing there was a nominal gain for sellers in 89.9 per cent of transactions, up from 88.3 per cent in the three months to June.
The increase in profit-making sales through the December quarter was attributed to increased sales volumes, with CoreLogic estimating that sales volumes increased 23.6 per cent through the quarter on the three months to September, and sales volumes for the quarter were also 20.4 per cent above the five-year average.
Profitability in Australian dwelling sales is now above pre-COVID-19 levels, where the rate of profit making sales was 87.9 per cent in the three months to February 2020.
The rate of profit-making house sales rose to 92.7 per cent, which is the highest level of profitability since the June quarter of 2018.
CoreLogic’s Head of Research Eliza Owen said as property values rose across each state and territory through the December quarter, buoyed by a cash rate reduction through November, the value of profits also increased substantially.
“Total gains from resales in the December quarter rose to $31.9 billion, up from $24.8 billion in the previous quarter,” Ms Owen said.
“Combined losses from resales also shrank from $1.2 billion to $1 billion from the September to December quarter.”
The results are particularly significant given the uplift in sales volumes in the three months to December, much of which was driven by an increase in transaction activity across Melbourne.
Across Greater Melbourne, the rate of profit-making sales increased from 93.0 per cent in the three months to September to 94.3 per cent for the December quarter.
This reflected a 1.5 per cent increase in dwelling values as the city’s economy improved when extended lockdowns ended.
There were largely positive results for real estate sellers across the coastal markets of Australia, following further increases across regional property markets in the three months to December.
Five of the nine regions measured experienced a rate of profit-making sales of above 95 per cent through the December quarter, including Geelong (98.5 per cent), the NSW Mid North Coast (96.3 per cent), the Newcastle and Lake Macquarie region (96.7 per cent), the Richmond and Tweed region (96.7 per cent) and the Sunshine Coast (96.3 per cent).
The report also noted that owner-occupiers had a higher incidence of profit-making sales, with 92.2 per cent seeing a profit on resales compared to 84.9 per cent among investors.