Short term loss-making resales continue to rise

Short term loss-making resales continue to rise

  20 Dec 2023

Key takeaways

CoreLogic analysed approximately 86,000 dwelling resales in Q3 2023.

The incidence of profit-making sales nationally increased to 93.5%, higher than the decade average of 90.8%, and the highest rate of profitability since the three months to July 2022.

The median gains from resale were $298,000 in the quarter, and the total nominal profit from resales were $27.4 billion.

The median losses from resale were -$40,000, and the total nominal losses were $313 million.

Among the capital cities Darwin had the highest portion of loss-making resales at 30.3%, followed by Perth at 10.0%.

Adelaide was the most profitable market of all the regions and capital cities, with just 1.5% of resales making a loss.

Owner occupiers continued to see a smaller rate of loss-making than investors, at 3.2% compared to 10.0% of investors.

The median hold period of resales across Australia was 8.8 years, up slightly from 8.7 years in the June quarter.

However 2023 saw an increased number of short term resales where properties were held for less than 3 years.

Who’s winning and who’s losing when they sell their properties?

Well…profitability from resales continued to rise amid a national recovery in home values, however short-term loss-making resales also increased, according to CoreLogic’s Pain & Gain report for the September quarter.

Profit Making Sales

Approximately 86,000 resales were observed by CoreLogic through Q3 2023, with 93.5% recording a nominal gain, and a median gross profit of $298,000.

This was up from Q2’s revised 92.9% of profitable sales at a median gross gain of $290,000.

Total nominal profits from resales in the September quarter were estimated to be $27.4 billion, almost $6 billion higher than a low of $21.6 billion in the three months to February this year, which coincides with the trough in national home values.

While overall profitability increased, loss-making short-term resales (properties held for three years or less) rose to 6.6%, up from 3.6% just 12 months ago.

National Overview

The chart below shows the rolling rate of loss-making sales across the capital cities versus regional areas of Australia.

Loss Making Sales Capitals Vs Regional

As with capital growth trends, the change in the rate of profit-making sales has generally been more extreme in capital city markets through the past few cycles.

The capital city market saw a peak-to-trough decline in home values of -8.1% from mid-2022 to the start of this year, compared to a -5.8% drop in the regional market.

Since bottoming out, values recovered faster in the capital cities to the end of September (up 8.0%) than in the regions (up 2.9%).

This has led to a faster fall in the rate of loss-making resales across the capital city market in the past few quarters, though it is still higher than the rate in regional Australia. The combined capital cities loss-making sales rate fell 90 basis points in the quarter to 7.2%.

In the combined regional market, the rate of loss-making sales fell 30 basis points in the quarter, to 5.1%.

 

Every capital city-dwelling market except ACT saw a decline in the rate of loss-making sales.

Although the ACT saw a 50-basis point rise in the rate of loss-making sales, the rate itself was almost half the combined capital city rate, at 2.6%.

Adelaide proved to be the most profitable city for the fifth consecutive quarter, with only 1.5% of resales across the city making a nominal loss, which coincides with an extraordinary stretch of capital growth across the market.

Perth retained the second-highest rate of loss-making sales among the capital city markets behind Darwin, at 10.0% and 30.3% respectively.

However, a strong capital growth trend has supported a reduction in the rate of loss-making sales in Perth from 42.1% at the onset of the pandemic.

Perth’s rate of loss-making sales is now far more comparable to that of east-coast capitals, where Sydney and Melbourne had loss-making resale rates of around 9%.

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