INDUSTRY NEWSNationalReal Estate News

Property gains hit a 14-year high

Homeowners are cashing in on the back of rising prices, with profitable resales reaching the highest level since July 2010, according to new data.

CoreLogic’s Q1 2024 Pain & Gain report revealed 94.3 per cent of transactions recorded a nominal gain, buoyed by consistently rising home values, which outweighed economic challenges and persistently high mortgage rates.

CoreLogic Head of Research, Eliza Owen, said the number of transactions increased 8.5 per cent from the same quarter of last year, while national home values rose 1.7 per cent in the quarter.

She said the weaker median gross profit of $265,000 – down from a revised $268,000 made by those vendors who sold in the final quarter of 2023 – was partly compositional, with a higher portion of unit resales through the start of the year than in the previous quarter.

“Despite the slight drop off in the median nominal gain, the rate of sellers making a profit has improved over the year and is the highest in Australian dwelling sales since July 2010,” Ms Owen said.

“This increase in the profitability rate across the Australian housing market helps to shore up financial stability for many property owners at a time when higher mortgage costs are starting to take their toll on household budgets.”

While the rate of profit-making sales was up, the value of combined profits was down from the December quarter, in part due to the seasonal decline in sales. 

CoreLogic estimates the combined value of nominal gains from resale was $28.6 billion in the March quarter, down from $30.6 billion in the December quarter of 2023.

Nominal losses from resales were $278 million in the quarter, down from $302 million in the previous quarter.

Outside of the Northern Territory, Melbourne had the highest rate of loss-making sales of the capital city markets at 9.2 per cent, up from 8.9 per cent in the previous quarter.

Adelaide and Brisbane were tied for the most profitable cities, with a loss-making sales rate of just 1.6 per cent of resales.

Source: CoreLogic

Ms Owen said Perth had shown a remarkable turnaround in the past few years, as loss-making sales declined to 6.4 per cent from the 43.8 per cent recorded in the June quarter of 2020.

She said because of the city’s strong metrics – home values up 6.1 per cent in the three months to May, and a median selling time of just 10 days – conditions were heavily in favour of Perth sellers with an additional improvement in profitability expected in the June quarter.

“In the December quarter of last year, Perth managed to improve its position from the second least-profitable capital city for the first time since 2015,” she said.

“The rate of loss-making sales has continued to shrink, and it’s overtaken Sydney and Melbourne

“Perth values may have grown rapidly in the past 12 months, up 22.1 per cent, however, the median dwelling value is still one of the more affordable cities in the country relative to local incomes.

Short-term resales have become an indicator of how households respond to rising interest rates.

Source: CoreLogic

Ms Owen said the latest figures suggested the short-term selling for properties owned for two years or less has passed a peak, as the value of housing lending on fixed terms had also passed a peak by March 2022.

“As housing values have risen, the rate of loss-making sales within short-held properties has also declined,” she said.

“Interestingly though, properties held for two to four years have made up a relatively high portion of resales in the March quarter at 15.3 per cent, which may be influenced in part by the expiry of three-year fixed terms.”

Across regional Australia through the March quarter, 95.6 per cent made a nominal gain, compared to 93.5 per cent of resales in the capital city markets.

“The rate of loss-making sales in regional Australia has structurally shifted lower from a pre-COVID decade average of 13.0 per cent to 7.2 per cent since March 2020,” Ms Owen said.

“This shift is driven by increased demand in lifestyle regional markets, the affordability of major regional centres compared to capital cities, and a recovery in resource-based regional markets.”

Across Australia, houses continued to deliver higher rates of profit-making sales compared to units. 

The report shows 97.1 per cent of house resales made a nominal gain in the March quarter, compared to 89.0 per cent of units.

Ms Owen said the gap between house and unit profits had roughly tripled in the past four years with nominal gains from houses sitting 85.5 per cent higher than units in the March quarter of 2024.

The median nominal gain for houses in the March quarter was $320,000, compared to a median nominal gain for units of $172,500.

“The enormous capital gain windfalls afforded to detached house owners over the past few years is another illustration of the ‘haves’ and ‘have nots’ of real estate,” Ms Owen said.

“Underlying land value, scarcity, and a desire for more space through the pandemic has helped drive buyer demand and in turn led to a more substantial rise in house values relative to unit values.

The latest data shows that the median hold period for resales places the median initial purchase date in May 2015, during which time national home values increased by approximately 58.2 per cent through the end of March 2024.

“Most markets have seen a sizable lift in home values in the last eight years, however, it may surprise people to know there are still markets where values have softened through this period, this includes Darwin and the rest of the Northern Territory,” she said.

“Time in the market rather than timing the market is critical to maximising returns for most resales. Generally, the longer a vendor holds a property the higher the returns with vendors selling after 30 or more years attracting the largest median gain of $780,000.”

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Rowan Crosby

Rowan Crosby is a senior journalist at Elite Agent specialising in finance and real estate.