Feature Article: Real Estate Profitability Improves Over December 2020 Quarter

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Article #1: Raft of rental law reforms come into place in Victoria

Article #2: Priced-out city first-home buyers turn to ‘rentvesting’ in regional markets

Article #3: Booming property prices push household wealth to record levels in Australia
Jason Round

REAL ESTATE PROFITABILITY IMPROVES OVER DECEMBER 2020 QUARTER

Data analysed from 98,000 sales of property dwellings in the December 2020 quarter has shown that Australian real estate has increased in profitability compared with the September quarter. CoreLogic’s Pain and Gain report showed that a total of 89.9% of transactions in the December quarter showed a profit for the seller, up from 88.3% in the September quarter.

Property values in every state and territory, and in all capital cities and regions showed the value of profits increased substantially. Further, the median profit on resales across Australia rose to $230,000, up from $200,000 the previous quarter.

CoreLogic’s Eliza Owens noted that “Total gains from resales in the December quarter rose to $31.9 billion, up from $24.8 billion in the previous quarter. Combined losses from resales also shrank from $1.2 billion to $1 billion from the September to December quarter.” The result was attributed to an increase in sales volumes, with sales transactions increasing by 23.6% in the December quarter compared with the September quarter.

Much of this increase was driven by an increase in transaction activity across Melbourne, as the city rebounded strongly from an extended lockdown. The sales volume in Melbourne is also reflected in the rate of profit-making sales in the city increasing from 93% in the September quarter to 94.3% in the December quarter. 

The capital city which showed the largest incidence of profit-making sales was Hobart, with 97.2% of transactions realising a profit. This compares with 96.7% of transactions realising a profit in the September quarter. Hobart has held the position of the most profitable capital city for real estate sales since March 2018. 

The city with the lowest incidence of profit-making sales was Darwin, where just 51.4% of transactions showed a profit. While the number of loss-making transactions stood at 48.6%, this has fallen from 50.6% in the September quarter.

While profit rose in both houses and units, the December quarter showed once again that houses are more profitable than units. A total portion of houses selling for a loss fell from 9.3% in the December quarter to 7.3% in the December quarter. With 92.7% of houses selling for a profit, this was the highest level of profitability for houses since the June 2018 quarter. Meanwhile, the number of profitable units fell from 19.6% to 18.7%. It is also worth noting that owner-occupiers saw a higher incidence of profit from resales at 92.2% compared with investors at 84.9%. This is probably a reflection of the lower profitability of units compared to houses, with many units owned by investors. 

For investors, the most profitable capital city was Sydney, with 94.7% of properties sold by investors realising a profit. The most profitable region for investors was Regional Victoria, where 98.7% of properties sold by investors realised a profit. 

regional graph

Four regional centres across Australia recorded profitable sales from 100% of transactions. These were Bellingen in Regional NSW; Burnie in Regional Tasmania; and Mildura and Warrnambool in Regional Victoria. 

With Australian property markets currently experiencing strong price rises, it is expected that the number of property transactions that realise a profit will increase over the next few quarters.

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RAFT OF RENTAL LAW REFORMS COME INTO PLACE IN VICTORIA

More than 130 rental law reforms have been put in place in Victoria from today in the biggest industry overhaul in over 25 years.

The raft of changes affect private rentals, caravan parks, rooming houses and residential villages in the state.

Consumer Affairs Minister Melissa Horne in an announcement today said the reforms were about giving renters the right to safe, secure and affordable accommodation.

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PRICED-OUT CITY FIRST-HOME BUYERS TURN TO RENTVESTING IN REGIONAL MARKETS

Desperate first-home hopefuls locked out of expensive capital cities are renting in the city and investing in more affordable regional property markets rather than leaving their cash in the bank, buyer’s agents said.

Stunning major-city price growth has caught out many buyers, quickly leaving them behind since the market began to bounce back last year.

The recovery has continued this year with the strongest pace of growth for years. Sydney property values jumped 2.5 per cent and Melbourne rose 2.1 per cent in February alone, on CoreLogic data.

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BOOMING PROPERTY PRICES PUSH HOUSEHOLD WEALTH TO RECORD LEVELS IN AUSTRALIA

Booming property prices have pushed Australia’s household wealth to record levels, despite hundreds of thousands of people remaining unemployed.

The value of Australia’s residential property jumped by roughly $250 billion in the last three months of last year.

It followed an increase in property values of more than $200 billion in the September quarter.

According to the Australian Bureau of Statistics (ABS), the combination of rising property prices and a recovery on stock markets saw total household wealth grow by $501 billion in the December quarter — the largest quarterly growth since December 2009.

Full Article Here.

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