Property Resale Winners Outstrip the Losers
Indicative of the magnitude of the profits realised from property over the June 2017 quarter was property resales. Combined, resales earned sellers $18.2 billion in gross profits with the median profit recorded at $195,000. On the downside, gross resale losses totalled $469.6 million with the median loss recorded at $35,000.
The latest CoreLogic Pain & Gain June 2017 quarter report showed that 89.8% of dwellings which resold over the period did so for more than their purchase price; a 0.3% increase from the March 2017 quarter result of 89.5%. Of the property types to resell over the period, houses scored top billing with profit gains of 92.1%, while unit resales achieved an 87.5% gain.
Owner occupiers were the biggest winners in the property resale stakes with overall profits estimated at 92.3%. Investors resales earned significantly less and recorded 88.1%; Sydney was the only major region of the country in where investors were more likely to resell at a profit than owner occupiers.
Across the combined capital cities, a significant gap in the proportion of profit-making resales was recorded by owner occupiers and investors in a number of cities; 93.7% of owner occupiers and 90.3% of investors resold their properties for a profit over the June 2017 quarter.
Proportion of total resales at a loss/gain,
houses vs. units, Jun 2017 quarter
CoreLogic research analyst Cameron Kusher said, “Investors were 4.8 times as likely to resell at a loss as owner occupiers in Melbourne, in Brisbane the figure was 2.8 times and in Canberra the figure was 3.5 times.”
Regional area resales also enjoyed a win. For the combined regional markets, 90.0% of owner occupiers and 83.7% of investors resold their properties for a profit over the June 2017 quarter. A greater proportion of owner occupiers continued to resell at a profit over investors. However, the same extreme differences between the vendor types as seen across some of the capital cities was not seen in regional markets.
Mr Kusher said, “For owner occupiers, the results show the benefits of selling in a buoyant market. In a falling market, owner occupiers may be more prepared to sell at a loss if they are purchasing their next home at an equivalent or greater discount. Because of taxation rules, investors may be more prepared to incur a loss because they, unlike owner occupiers, can offset those loses against future capital gains.”
“Should home values fall in the future, investors, which have been increasingly active in the housing market, may be more inclined to sell at a loss and offset those losses which in turn could result in much more supply becoming available for purchase at a time in which demand for housing falls because values are declining.”
Regions showing low profit-making resales continue to be headed by those linked closest to the mining and resources sector.
Mr Kusher said “While the June 2017 quarter results show a reduction in the proportion of profit-making sales in some of these regions, home owners seem willing to sell but there remains little demand to purchase in these regions which is resulting in a high proportion of vendors materialising losses. The regions with the lowest proportion of resales at a loss makes for interesting reading.
“The Sydney and Melbourne housing markets have been powerhouses over recent years however, regions outside but adjacent to Sydney are seeing a lower proportion of resales at a loss. Similarly in Victoria, Melbourne continues to see relatively few resales at a loss however, the proportion of loss-making resales is actually lower in both Geelong and Bendigo.”
Capital city & regional snapshot
1.9% of houses and 1.6% of units resold for less than the previous purchase price. Each of the Ashfield, Camden, Hunters Hill and Mosman council regions recorded all of their resales at a price above the previous purchase price. The lowest proportions of profit-making resales over the quarter were recorded in: Rockdale (95.4%), Bankstown (95.8%) and Strathfield (96.4%) however, each of these regions still recorded more than 95% of resales at a profit.
Melbourne recorded 1.1% of houses and 9.6% of units reselling at a loss over the June 2017 quarter. The gap between losses for houses and units remains wide but both property types have seen a reduction in loss-making resales over the quarter. The Mitchell and Murrindindi council areas recorded all resales over the quarter at a profit. The council regions with the fewest resales at a profit over the quarter were: Melbourne (74.8%), Stonnington (88.2%) and Moonee Valley (90.3%).
Greater Brisbane: 4.1% of houses resold in the June 2017 quarter transacted below their previous purchase price compared to 25.8% of units. The gap between losses on houses and units has continued to widen over the quarter. Across the broader South-East Queensland region, the instances of resales at a profit were greatest in: Redland (94.6%), Logan (93.0%) and Sunshine Coast (92.8%). The instances of resales at a profit were lowest in: Lockyer Valley (78.9%), Scenic Rim (88.0%) and Ipswich (88.6%).
7.5% of houses and 12.4% of units resold over the June 2017 quarter, transacted below their previous purchase price. The proportion of loss-making resales was steady over the quarter for units but rose for houses. Every property resold in Walkerville over the quarter did so at a profit with Norwood Payneham St Peters (97.3%) and Mitcham (96.3%) also seeing a high proportion of resales at a profit. The regions with the fewest profit-making resales were: Playford (77.3%), Gawler (85.1%) and Salisbury (86.9%).
Perth continued to trend higher over the June 2017 quarter. Over the quarter, 24.2% of houses and 37.8% of units resold for less than the previous purchase price. Across the council regions, the areas with the highest proportion of profit-making resales were: Cottesloe (89.5%), Canning (84.1%) and Melville (83.2%). The regions with the lowest proportion of profit-making resales were: Perth (44.0%), Peppermint Grove (50.0%) and Murray (57.1%).
Hobart recorded 3.9% of houses and 8.5% of units reselling at a loss over the June 2017 quarter. The occurrence of resales at a loss increased marginally over the quarter for houses and units. The Kingsborough (98.9%), Hobart (98.3%) and Clarence (96.0%) council areas had the highest proportion of profit-making resales over the quarter. The regions with the lowest proportion of profit-making resales over the quarter were: Brighton (82.3%), Derwent Valley (88.2%) and Sorell (93.7%).
28.4% of houses and 53.4% of units resold for less than their previous purchase price. The instances of loss-making resales have trended higher over the quarter for units but lower for houses. Across the council areas, Litchfield saw the highest proportion of profit-making resales (78.9%) followed by: Palmerston (67.2%) and Darwin (59.6%).
Canberra houses recorded an increase in loss-making resales over the June 2017 quarter while units recorded a decline. Over the quarter, 97.8% of all houses resold transacted for more than their previous purchase price and 79.3% of units resold for more than their purchase price.
Coastal markets, particularly those linked to lifestyle, have generally experienced a significant decline in the proportion of resales at a loss over recent years. This is reflective of demand growing for coastal / lifestyle property and also reflective of reinvestment from Sydney and Melbourne home owners that have accrued substantial equity in their properties. Across those regions analysed, the proportion of resales at a loss over the June 2017 quarter were recorded at: 1.9% in Illawarra, 1.8% in Newcastle Lake Macquarie, 4.4% in Richmond-Tweed, 5.7% in Mid North Coast, 2.4% in Geelong, 26.5% in Bunbury, 26.1% in Cairns, 8.9% in Gold Coast and 7.2% in Sunshine Coast. All regions except for Bunbury, the proportion of loss-making resales is substantially lower than it has been over recent years. It highlights the resurgent confidence in coastal and lifestyle markets which has emerged over the past few years. The proportion of homes resold at a loss fell across most of these regions over the past quarter, the exceptions were: Newcastle and Lake Macquarie, Bunbury and Cairns.
Houses which sold at a loss over the June 2017 quarter had a median hold period of 6.4 years compared to a median of 9.4 years for those that had sold for a profit. For units, those sold at a loss had typically been held for 6.9 years and those sold for a profit had been held for 7.8 years.
Investors vs Owner Occupiers
A greater proportion of investors that resold their properties over the June 2017 quarter incurred a loss compared to owner occupiers. Over the quarter, 92.3% of resales by owner occupiers were at a profit compared to a lower 88.1% of resales by investors. Sydney was the only major region of the country in which investors were more likely to resell at a profit than owner occupiers.
Resales of homes held for less than five years:
Of those homes which were resold over the quarter and had been held for less than five years, 10.7% of houses resold for a loss and 12.2% of units resold at a loss. Certain markets and property types saw a very high instance of resale loss on properties resold over the quarter that were held for less than five years:
• For houses; 48.8% in Perth resold at a loss, 37.3% resold at a loss in regional Western Australia, 58.5% resold at a loss in Darwin and 50.0% resold at a loss in regional Northern Territory.
• For units; 31.8% resold for a loss in Brisbane. 63.6% resold at a loss in regional South Australia, 69.3% resold for a loss in Perth, 34.8% resold for a loss in regional Western Australia and 54.2% resold at a loss in Darwin.
What is the Pain & Gain Report?
A quarterly analysis of residential properties resold over the quarter & compares the most recent sale price to the previous sale price in order to determine whether the property sold at a gross profit or gross loss. It provides a proxy for the performance of each housing market and highlights the magnitude of profit or loss the typical seller of a home makes across those regions analysed.