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Key findings from CoreLogic's Pain & Gain report, September Quarter 2024:
- CoreLogic analysed approximately 95,000 dwelling resales in Q3 2024.
- The incidence of profit-making sales nationally increased to 95.0%.
- The median nominal gain was a record high $295,000 in the quarter, and the total nominal resale profit was $33.98 billion.
- The median nominal loss was -$40,000, and the total nominal resale loss was $270 million.
- Brisbane claimed the top spot as the most profitable city for the second quarter in a row, with 99.4% of homes sold making a nominal gain.
- Darwin and Melbourne saw the biggest quarterly increase in the rate of loss-making sales across the capitals.
- Houses remained far more profitable than units through the September quarter, with only 2.9% making a loss compared to 9.4% of units.
- The median hold period of resales across Australia was 9 years, up from 8.8 years in the previous quarter.
Australian home sellers continue to see rising rates of profitability and dollar value returns despite slowing market conditions, declining capital growth and lower clearance rates.
CoreLogic's latest Pain & Gain report (September Quarter 2024) analysed 95,000 resales over the period, showing the median nominal gain reached a series high of $295,000, since the series started in the mid-90s. The median loss from resale was steady on the previous quarter at $40,000, but up slightly from the five-year average of $39,000.
The report also showed the incidence of loss-making resales fell to 5.0%, the lowest level since March 2008.
Total nominal gains from resale were just under $34 billion in the quarter ($33.98b), up from $33.3b in the previous quarter. Combined losses were $270 million, compared to $292.4 million in the previous quarter.
CoreLogic’s Head of Research Eliza Owen said the results can be attributed to growth of 0.8% in national home values through the quarter on top of reasonably strong housing demand conditions.
She also pointed to a strong prudential lending environment as a possible factor.
“A decline in home values is only a problem for sellers if they have issues servicing home loan repayments, or are in some other circumstance where they need to sell,” she commented.
“Otherwise, homeowners can simply hold their properties back from the market until such time there is stronger buyer demand.”
“That being said, there are still clearly pockets of pain where home sellers need to offload their property in spite of weak market conditions, or values remaining substantially below previous record highs.”
Across the capital cities
Outside of Darwin, Melbourne had the highest incidence of loss among the capital cities at 9.9% in the September quarter.
Melbourne was also the only capital city market to see an increase in the rate of loss-making sales. Despite the higher incidence of loss across Melbourne, the underlying number of loss-making sales did decline through the quarter.
At the other end of the spectrum, Brisbane was the most profitable city for the second consecutive quarter. Of the resold homes in the quarter 99.4% made a nominal gain, up from 99.2% in the previous quarter, and 97.4% a year ago.
Perth saw one of the biggest increases in the rate of profit-making sales in the quarter (behind Canberra), increasing 120 basis points to 96.9%.
Houses once again prove more profitable
Houses continued to deliver superior resale results in the September quarter, with only 2.9% making a loss compared to 9.4% of units.
Units are three times as likely to make a loss from resale, accounting for just over a third of resales in the quarter (33.5%), but making up 62.1% of loss-making resales. The median gain from house resales was 72.5% higher than for units, at $345,000 compared to $200,000.
Ms Owen said: “For the series of loss-making sales going back to the mid-90s, units have always had a higher chance of making a loss.”
She attributed this to supply factors and the fact that units are the preferred investment dwelling, with low maintenance, lower price points and generally higher rental yields.
“Investors are also potentially in a better position to sell at a loss, because they may be able to offset that loss on future capital gains from property,” she said.
Short-term reselling and loss-making sales
Ms Owen said a notable feature of short-term, loss-making sales is that two-year hold periods for loss-making sales have trended lower.
The portion of overall resales held for less than two years came down to 6.3% through the September quarter, down from 7.0% in the previous quarter.
Of those resales in the September quarter, 6.1% made a loss, down from 6.6% in the previous quarter, and a high of 9.9% in the three months to September 2023.
“Three years on from mortgage rate lows, the incidence of loss is rising for those who have held between two and four years,” she said.
Homes held between two and four years (purchased between October 2020 and September 2022) have seen more substantial increases in interest costs, which for some home buyers will have gone beyond the 300 basis point serviceability assessment buffer.
“This may be reflected in the relatively strong bump in homes sold which were held between two and four years.”
Australians ‘hold on’ for nine years on average
The median hold period of resales across Australia was 9.0 years in the September quarter, up slightly from 8.8 in the previous quarter. This places the median initial purchase date of resales around the September quarter of 2015.
Since September 2015 through to the end of September 2024, national home values increased 57.7%, though capital growth performance through this period has ranged from an 87.7% rise across regional Tasmanian dwelling values to a -3.2% fall across Darwin.
Profit-making resales had a slightly longer median hold period (9.1 years) than loss-making resales (8.0 years) in the September quarter.
Resource markets continue to deliver
Across the combined regions during the September quarter of 2024, 8.9% are estimated to have sold at a nominal loss, a strong reduction from 16.4% in the same period of 2023.
While 8.9% is still well above the national figure (5%), it is a remarkable turnaround from the December quarter of 2018, when almost half of all homes in these areas sold for a nominal loss (46.1%).
Ms Owen said that strong capital growth across the resource-based markets of Central Queensland, South Australia and Western Australia in the past few years have supported the turnaround in profitability, with 91.1% of resales in the resource markets marking a nominal gain.
The median nominal gain from resale in these markets was highest in Central Queensland at $173,000 through the quarter and ranged down to $92,000 in the South Australia – Outback region.
CoreLogic Australia