Real estate sellers in regional markets boosted the overall performance of the resale markets in the second quarter of the year, pushing profitability to a 10-year high.

CoreLogic’s latest Pain and Gain report showed that 91.5% of home resale sales in the June quarter reported a nominal gain on purchase price. This represents the highest level of profitability the report has recorded in more than a decade.

Eliza Owen, CoreLogic’s head of research, said profitable home sales have risen for four consecutive quarters, despite the impact of the COVID-19 pandemic.

The number of home resales even rose by 9% on a quarterly basis during the quarter.

“This number really reflects the extraordinary recovery in home values ​​after a minor setback from the initial impact of COVID-19,” said Ms Owen.

The report also listed the following market indicators:

  • Median retention period on all resale: 8.8 years
  • Median gross resale profit: $256,000
  • Median Gross Losses: – $43,000

Ms. Owen said current market conditions have seen property owners who resell after just two years earn a median return of $123,000.

Those who made money after owning the property for about 30 years could potentially get an average return of $710,000.

“Such high profitability could encourage supplier participation and reduce typical wait times, especially as major cities work their way out of the 2021 lockdowns,” said Ms Owen.

Regional markets lead the way

Regional and boom exchange markets were the top spots during the quarter, with nearly 100% of sellers making profits from their resale.

For example, the Ballarat SA4 region in Victoria achieved record profitability, with 99.7% of resales profiting.

This stellar performance was evident in regional Victoria, where 98.7% of resale was above purchase price.

“Impressive returns were not limited to just Victoria as 97.6% of Sydney home resale reached a level of profit, the highest level of profitable resale since 1982,” said Ms Owen.

Loss-making unit sales still high

In terms of housing type, homes continued to favor buyers, with 94.4% of resale transactions turning a profit during the quarter.

However, units still had a high share of loss-making resale at 15.3%. The CoreLogic report showed that a quarter of these loss-making unit sales were concentrated in three main areas: Brisbane, the Gold Coast and Melbourne.

It is also noteworthy that the bulk of loss-making unit resales have occurred in the Perth LGAs, including Cockburn Council, where 69.5% of unit resales were nominally at a loss.

Profitability begins to slow

Despite the excellent profitability recorded during the quarter, the pace of house price growth is beginning to slow down, which will erode profitability momentum.

Ms Owen said several headwinds need to be monitored, including affordability restrictions, the tightening of credit conditions and a rebound in listing volumes.

“While profitability is expected to increase across Australia in the coming quarters, it is clear that the profitable resale rate reflects the trends we see in capital growth across cities and regions,” said Ms Owen.

Photo by Oleg Magni on Pexels.

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