Profitable home sales assisting in financial stability: CoreLogic

The latest Pain & Gain report released by CoreLogic for the December 2023 quarter has revealed an uptick in profit-making home sales, which has supported the housing market amid an increase in mortgage costs.

The report revealed that 94 per cent of transactions recorded a nominal game, with the median gross profit rising to $310,00 with a total nominal resale profit of $29.9 billion. This marked an increase across all three metrics when compared to the September quarter 2023.

CoreLogic’s head of research Eliza Owen said: “The broad-based increase in profitability and value across the Australian housing market helps to shore up financial stability at a time of stark increases in mortgage costs for some households.”

Indeed, the Reserve Bank of Australia’s latest Financial Stability Review – March 2024 estimated that around 5 per cent of variable rate mortgagors were in a position of household expenses exceeding their income.

“For many households in this position, this could mean running down savings buffers, cutting discretionary spending, or shifting consumption to cheaper goods and services,” Owen added.

“But for those that do need to sell their home, continued increases in most markets will help to reduce the instance of loan default.”

Furthermore, the data found a slight easing in short-term, loss-making resale conditions, as the portion of resales within a two-year period fell from 7.9 per cent to 7.5 per cent during this period.

On the other hand, the report revealed an increase in resales with a hold period of between two and four years, from 13.3 per cent to 14 per cent. These represented homes acquired over 2020 and 2021.

“While this may include sales prompted by a notable uplift in mortgage rates, only 3.7 per cent of homes sold within this hold period made a nominal loss (almost half the rate of all loss-making resales nationally),” Owen said.

Overall, the number of loss-making resales fell to 5.1 per cent. The median nominal loss was $40,000 and the total nominal resale loss was $305 million.

“The improvement in the key metrics of this report really highlight[s] the improving profitability in the housing market since the recovery trend began in early 2023,” Owen said.

“We’ve observed a decline in the number of loss-making sales, which fell to just 5,500 during the December quarter, even as overall transaction volumes increased.”

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