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.
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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