Property resale profits weakest in over five years

According to CoreLogic’s latest Pain and Gain report, 11.1 per cent of homes resold at a loss in the quarter ending September 2018, with 88.9 per cent of homes resold for a gross profit over the same period, falling from 89.7 per cent in the previous quarter.

CoreLogic noted that the latest figures represent the weakest quarterly decline in property resale profits since the three months to August 2013.

The research group also found that the gap between houses and units sold at a profit widened, with 90.8 per cent of all house resales generating a gross profit, compared to 83.6 per cent of all units.  

In dollar terms, property resales in Australia totalled $14 billion, with overall losses from resales amounting to $488.1 million.

According to the figures, the majority of the $14 billion in resale profits was generated in Sydney and Melbourne, which accounted for 31 per cent and 24.7 per cent of total profits, respectively.

CoreLogic head of research Cameron Kusher observed: “This is reflective of both the higher cost of housing in Sydney and Melbourne and the strong growth in dwelling values prior to the recent downturn, which has resulted in substantial profits.

“As a comparison, these two cities accounted for just 12.3 per cent and 7.4 per cent of the total value of losses nationally over the quarter.”

Conversely, the research revealed that locations with the highest share of losses nationally were Perth (23.7 per cent) and regional Queensland (19.6 per cent).

Mr Kusher added: “The data shows that some regions surrounding Sydney and Melbourne are recording even fewer resales at a loss than the capital cities.

“At the other end of the spectrum, six regions – all linked to the resources sector – recorded at least 40 per cent of all resales at a loss over the quarter.

“It’s important to note, though, that although in many of these regions, the share of losses is now lower than at the peak, when you consider the material decline in values across these regions, these instances of loss remain elevated.”

Mr Kusher concluded that the higher rate of resale losses in the resource states reflect that housing values “remain well below their peaks” in such areas.

Moreover, the research found that capital city housing markets have continued to record a lower proportion of resales at a loss than regional markets, with Mr Kusher expecting the downward trend to continue.

“Loss-making resales across the combined capital cities increased by a greater amount than in regional markets,” he said.

“We expect the proportion of loss-making resales to climb further over the coming quarters as housing market conditions continue to slow.”

Overall, the latest CoreLogic home value index revealed that national dwelling values have slumped by 4.8 per cent nationwide, driven by a 6.1 per cent drop across Australia’s capital cities, led by an 8.9 per cent fall in Sydney and a 7 per cent decline in Melbourne.

[Related: Concerns to ‘intensify’ as approvals plunge 32.8%]