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Hobart and regional Victorian homes lead the nation in profit-making sales

CoreLogic's Pain and Gain report for the September quarter reveals 88.1 per cent of sales made a profit; an increase of 1.8 per cent on the June quarter report.

Hobart had the highest rate of profit-making re-sales of all capital cities over the September quarter, according to the most recent data from CoreLogic.

In contrast, Melbourne was the only city that saw a decline in the rate of profit-making sales over the same period.

Yet regional Victoria was the most profitable ‘rest of state’ region, with 97.5 per cent of dwellings sold for a profit in the three months to September, with the regions seeing the rate of profit-making sales increase faster than capital cities.

Non-profitable sales did not grow in percentage, but their overall value deepened by $319m to pass $1.2bn, with investors more likely to sell for a loss than owner-occupiers.

Further key points from the September quarter Pain and Gain report include:

  • The Sunshine Coast hit a record high rate of profit-making sales in the September quarter at 96.4 per cent
  • Profitability across both houses and units rose across Australia
  • Houses are still more profitable than units, but the gap is narrowing, moving from 11.2 per cent to 10 per cent
  • A higher portion (17.1 per cent) of property investors sold their dwelling at a loss during the September quarter compared with owner occupiers (10.4 per cent)
  • For profit-making sales, the median hold period was nine years, and for loss making sales it was 6.7 years
  • Hobart has now held the highest rate of profit-making sales since March 2018

Eliza Owen, CoreLogic’s Head of Research Australia, said coastal regional markets were also very profitable for sellers.

“Profit-making sales represent over 95 per cent of resales across six major coastal markets: Geelong, Illawarra, the Mid North Coast, the Newcastle Lake Macquarie region, the Richmond Tweed region and the Sunshine Coast.

“The combined regional Australian market saw the rate of profit making sales increase 150 basis points, to 89.2 per cent in the September quarter, while the rate of profitability across capital city markets expanded 30 basis poin per cents, to 87.2 per cent.”

Investors vs Owner Occupiers

Ms Owen said despite the higher rate of loss observed in investor sales in the quarter, the rate of properties re-sold at a loss was down from 18 per cent in the June quarter, while the rate of loss making sales among owner occupiers was down from 11.1 per cent.

“CoreLogic home value indices show dwelling values across Hobart have seen annualised growth of 7.9 per cent for the five years to December 2020 – the highest annualised growth rate of the capital city markets,” she noted.

Houses vs Units

There was generally a higher rate of return for houses ($225,000) than units ($125,000), but unit profitability rose faster than that of houses.

Even though the rate of loss making sales declined faster across the unit segment, units were still about two times more likely to sell for a loss than houses in the September quarter.

“The portion of properties sold at a loss among houses fell from 10.2 per cent in the three months to June to 9.6 per cent, while the portion of loss making unit sales fell from 21.4 per cent to 19.6 per cent,” Ms Owen said.

She further explained the overall analysis reflects the recent resilience seen in the property market, and that the market is expected to improve further in the coming months.

“With record low mortgage rates, a faster than expected economic recovery and relatively low cases of COVID-19, profitability is tipped to trend upwards over the coming quarters.”

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