A vital research paper into the wealth created by Australia’s largest asset class, the Pain and Gain Report reveals the proportion of properties sold for a nominal profit or loss in Q4 2023.
The Australian property market continues to demonstrate sustained resilience, with the rate of profit-making sales and number of transactions increasing in the December quarter.
CoreLogic's latest Pain & Gain report analysed approximately 90,000 resales in Q4 2023, revealing 94% of transactions recorded a nominal gain. The median gross profit also saw an uptick to $310,000, marking an increase across all three metrics compared to the previous quarter’s results.
CoreLogic’s Head of Research Eliza Owen said the upward trajectory aligns with the sustained growth in home values observed throughout the year.
Loss-making resales declined to 6.0% of resales in the three months to December, to a median of $40,000, as the volume of loss-making sales also fell by 5.1% on the previous quarter.
The total nominal profit from resales in the December quarter reached $29.9 billion, an increase from $28.7 billion in the previous quarter.
“The improvement in the key metrics of this report really highlight the improving profitability in the housing market since the recovery trend began in early 2023,” Ms Owen said.
“We've observed a decline in the number of loss-making sales, which fell to just 5,500 during the December quarter, even as overall transaction volumes increased.
“The broad-based increase in profitability and value across the Australian housing market helps to shore up financial stability at a time of stark increases in mortgage costs for some households.”
Short-term resale shift
The December data also indicated a slight easing in short-term, loss-making resale conditions. The portion of resales within a two-year hold period reduced from 7.9% in the September quarter to 7.5%. However, there was an uptick of resales with a hold period of between two and four years, from 13.3% in the September quarter to 14.0%.
“This change reflects homes that were bought in 2020 and 2021, and it turned out to be the most popular timeframe for reselling properties in the quarter. While some of these sales might have been influenced by a rise in mortgage rates, it's interesting to note that only 3.7% of homes sold during this timeframe ended up making a nominal loss,” Ms Owen said.
Regional market performance
Regional markets outperformed capital cities in terms of profitability, with 95.5% of resales in regional Australia making a nominal gain, compared to 93.2% in combined capitals. The increase in profitability was also more rapid across regional markets, indicating a strengthening trend outside major urban centres.
“Due to the lingering value add of the COVID-boom, regional markets are looking more profitable than capital cities,” Ms Owen said.
“Regional markets typically have lower property prices and a different lifestyle appeal, and are outperforming capital cities in terms of profitability potentially due to sustained demand, limited housing supply, and a more favourable cost of living environment.”
Most profitable markets
Adelaide remained the most profitable capital city market for the fifth consecutive quarter, with more than 98% of resales making a nominal gain in the three months to December. The Perth market also witnessed significant improvement in line with its high growth in home values, with the rate of loss-making sales reducing to 8.4%, marking its most profitable period since July 2015.
Houses vs. Units
Houses continued to deliver higher rates of profit-making sales compared to units, with 97.0% of house resales making a nominal gain, compared to 88.2% of units. However, Ms Owen said the gap in profitability between houses and units narrowed slightly, indicating a potential shift in market dynamics including affordability along with supply constraints.
“Underlying land value, scarcity factor and desire for more space through the pandemic has led to a substantially larger rise in house values relative to unit values over the past four years,” she said.
“The relatively large premium on house values has put them out of reach for many, particularly first home buyers and lower-income households. As units become increasingly attractive to buyers, the price gap between detached housing and medium to high density options will close and profitability of units will improve.”
Hold period trends
The median hold period of resales across Australia was 9.0 years in the December quarter, making November 2014 the median initial purchase date for resales through the quarter. Since that date, national home values have increased 63%.
“As noted in previous reports, there are now several markets where the incidence of loss-making sales is associated with relatively short hold periods,” Ms Owen said.
“Of the greater capital city and regional house markets, most loss-making sales have been held for less than three years. Loss-making unit sales were far more likely to be held for longer, due to weaker capital growth performance.”
At the national level, loss-making house sales had a median hold period of 5.9 years, where loss-making unit resales had a median hold period of 8.4 years.
Key findings for Pain & Gain, December Quarter 2023
- CoreLogic analysed approximately 90,000 dwelling resales in Q4 2023.
- The incidence of profit-making sales nationally increased to 94.0%.
- The median nominal gain was $310,000 in the quarter, and the total nominal resale profit was $29.9 billion.
- The median nominal loss was -$40,000, and the total nominal resale loss was $305 million.
- The number of loss-making resales fell 5.1%, to around 5,500.
- Adelaide remained the most profitable capital city market for the fifth consecutive quarter with just 1.5% of transactions recording a nominal loss. Brisbane had the highest proportion of profitable house resales at 99.3%.
- Perth recorded the biggest reduction in the rate of loss-making sales across the capital cities, declining from 9.6% in the September quarter to 8.4% in Q4.
- Houses remain more profitable than units, with 97.0% of houses in the December quarter resold for a nominal profit.
- The median hold period of resales across Australia was 9.0 years, up from 8.8 years in the September quarter.
Download the Pain & Gain report
Meet Eliza Owen
Head of Residential Research Australia
Eliza Owen was appointed the Head of Research at CoreLogic Australia in 2020.
Full profile