More Sydney houses are reselling for a profit than any other time in past 39 years, with the highest incidence of profitability found across the city’s Northern Beaches.
New data from CoreLogic‘s latest Pain and Gain Report shows 91.5 per cent of about 106,000 resales recorded a nominal profit-making gain in the June quarter.
Nationally, that’s the highest level of profitability in more than a decade.
Owners who resold after just two years pocketed a median return of $123,000, while those cashing in after more than 30 years of holding a property achieved a median return of $712,000.
Sydney market defies expectations
Vendors in Sydney faired even better with 94.4 per cent of all sales making a profit.
House resales jumped even further ahead with 97.6 per cent netting their owners a profit, which is the higest level since 1982.
The highest incidence of profitability across Sydney’s council areas was in the Northern Beaches, where 97.79 per cent of sales made a profit.
Clarke & Humel Principal, Michael Clarke, wasn’t surprised by the report’s findings, having seen prices in Sydney’s Northern Beaches go up “exponentially since we came out of that first major lockdown”.
“It’s defied expectations,” Mr Clarke said.
“It was only 12 to 18 months ago that people were thinking or being told there was going to be cataclysmic drops in not just the economies but also in real estate prices.
“It’s done the exact reverse of what most people thought may happen, that was almost embarrassing that so many people got it so wrong.”
Profitability across both house and unit markets increased through the June 2021 quarter, though the incidence of loss-making resales remained substantially higher across the unit segment.
Nationally, loss-making resale rates for houses were 5.6 per cent, down from 6.6 per cent in the previous quarter and 11.6 per cent in the June quarter of 2020.
In the three months to June, 15.3 per cent of units sold for a loss, down from 16.6 per cent in the previous quarter, and 21 per cent from the same quarter last year.
Mr Clarke explained the apartment market on Sydney’s Northern beaches has seen a particularly prominent boost over the past 12 months, as well as detached houses.
“People have been surprised about how many very large results have been happening in the apartment market,” Mr Clarke explained.
“With the people who are moving out of the apartment market, they’re not always looking to downsize so much because they have historically already downsized.
“Those are the types of people who are moving to other areas all together or who are going into nursing homes or whatever else. It’s those apartments routinely that there is still turnover in that space and there has been such pent up demand that they’re just going berserk.”
In fact, Mr Clarke has never seen more people “from all over Australia looking to move to the Northern Beaches”.
“I’ve found that COVID has really brought to the forefront of just about everybody’s mind that if or when they’re going to be locked down, they want to have the best 5km radius possible and the ultimate Australian lifestyle normally includes a beach,” he said.
The trend of lifestyle locations was only further solidified when Mr Clarke started receiving increasing inquiries from people who were currently based on Sydney’s Lower North Shore.
“I’ve seen a flip. Historically, places on the Lower North Shore – Mosman, Neutral Bay, Cremorne – routinely people would choose those in preference to the Northern Beaches,” Mr Clarke said.
“Now with the change in lifestyle and working from home and people’s desire to be at the beach, now we’re routinely seeing prices higher in Manly than we would in Mosman.
“People moving from the Lower North Shore, they historically came to the Northern Beaches and found they would get better value than they would on the southern side of The Spit. Now the comments we’re getting are, ‘Oh my god, it’s at least as expensive over here as it is over there and in some cases it’s even more expensive’.”
Profitability outlook
CoreLogic’s Head of Research Eliza Owen explained on a national level, profit-making residential property sales have increased for four consecutive quarters.
However, even though housing values have increased 13.5 per cent in the 12 months to June, Ms Owen said quarterly figures indicated the rate of growth was starting to slow.
“While profitability is expected to trend higher across Australia in the coming quarters, it is clear that the rate of profit-making resales mirrors the trends we’re seeing in city and regional capital growth rates,” Ms Owen said.
“As the rate of increase in values slows, as we have started to see each month since April, so too will the momentum in profitability.
“We’re monitoring a number of headwinds that may drag on, or even reverse housing market growth in the medium to long term, including affordability constraints, a tighter credit environment, a resurgence in listings volumes, and some economic factors including a slowdown in the resources sector.”
Melbourne market
Melbourne was one of two capital cities to see an increase in the rate of loss-making sales in the June quarter, rising 30 basis points to 5.4 per cent.
This was driven by the unit sector, with the rate of loss-making sales climbing from 12.2 per cent in the March quarter to 13.2 per cent in the June quarter.
The highest rate of loss-making unit resales was in Melbourne City Council at 34.8 per cent, with 87.1 per cent of those sales belonging to investors.
In complete contrast, Melbourne houses recorded the highest rate of profit-making sales out of the capital cities at 98.9 per cent in the June quarter.
Brisbane market
Profit-making sales across Brisbane increased 90 basis points to 90.1 per cent in the June quarter.
The rate of profit-making house resales was 98 per cent, while unit profitability came in at 72.6 per cent.
The highest rate of profit-making sales was in Somerset LGA, where 96.6 per cent of resales made a nominal gain.
Adelaide market
Greater Adelaide had the equal third highest rate of profit-making sales at 94.6 per cent, with the rate of profit-making resales jumping 1.9 percentage points to 87.7 per cent.
This is despite a slight drop in profitability across the housing sector, which fell 20 basis points in the June quarter.
The City of Tea Tree Gully had the highest rate of profit-making resales at 99.1 per cent, which could reflect the popularity of affordable prices in Adelaide’s northern suburbs.
Perth market
Market conditions continued to improve in Perth, where the rate of loss-making sales had averaged 34 per cent for the past five years.
In the 2021 quarter that dropped to 22 per cent, led by the unit sector where profit-making sales jumped from 53.2 per cent in the March quarter to 59.3 per cent in the three months to June.
Profit-making sales also rose from 79 per cent to 83.2 per cent in the housing segment.
In the City of Nedlands 95 per cent of house resales made a profit, followed by Cottesloe at 90.6 per cent.
Hobart market
Hobart recorded the lowest rate of loss-making sales for the 14th consecutive quarter, at 2.7 per cent for the three months to June.
Hobart also had the lowest difference between profit-making house and unit sales of all the capital cities.
Profit-making house resales came in at 97.6 per cent in the June quarter, compared with 96.6 per cent of unit resales making a nominal gain.
Darwin market
The June 2021 quarter was the 22nd quarter in a row that Darwin recorded the highest rate of loss-making sales out of all capital cities, despite falling 4.7 percentage points to 33.9 per cent.
But Darwin did record some good news, with the most significant drop in pain for vendors over the period.
Dwelling values climbed 6.3 per cent in the June quarter and have risen 25.7 per cent between February 2020 and August 2021.
The rate of profit-making house sales jumped from 67.7 per cent in the March quarter to 75.6 per cent in the June quarter.
Unfortunately the unit segment didn’t fare as well, with the rate of profit-making sales falling to 48 per cent.
ACT market
Profitability continued to rise in the ACT in both houses and units.
House resales recorded nominal gains on 98.7 per cent of properties, while 91.2 per cent of unit resales recorded a profit in the June quarter.
The rate of profit-making sales across all dwellings has risen from 88.6 per cent in the September 2019 quarter to 95.4 per cent in the June 2021 quarter.
Other key findings
- The median hold period of those resales was 8.8 years
- In Ballarat, 99.7 per cent of residential properties resold in the June quarter achieved a gain for the vendors
- In regional Victoria, 98.7 per cent of all dwelling resales in June made a nominal gain
- The main drivers for the record resale gross profits are tight listings and low mortgage rates.
- Loss-making sales were affected by border closures and weak inner-city rental markets.
