Last week the Australian Bureau of Statistics (ABS) released updated residential property price data for the March quarter, revealing some stonking gains in Sydney, Melbourne, Canberra and Hobart over the past year.
As a recap, here’s the price changes reported by the ABS both for the quarter and over the past year across Australia’s capitals.
Given the price divergence seen across the capitals, with gains in Australia’s largest housing markets outpacing those in most other capital cities, it perhaps comes as no surprise that the number of properties being sold for a higher price than what they were bought remained above 90% in the first three months of the year.
According to CoreLogic’s latest Pain and Gain report, 90.4% of homes sold for a higher price than what they were bought during the March quarter, down fractionally on the 91.2% level reported in the final three months of 2016.
Put another way, just 9.6% of homes sold for less than what they were originally purchased for during March quarter, a figure no doubt helped by years of strong price growth in Australia’s southeastern capitals.
In dollar terms, CoreLogic said that $20.9 billion in profitable sales were recorded during the quarter, equating to an average gain per sale of $185,000. In contrast, loss-making sales totaled just $493.8 million, or an average per sale of $35,000.
CoreLogic said that just 7.8% of properties sold at a loss in Australia’s capital cities during the quarter, significantly below the 12.6% level reported in regional centres.
It is worth noting, these figures are gross profits, and don’t include transactional costs such as stamp duties and legal fees.
While still a significant divide, the gap between the two is narrowing with the proportion of loss-making sales in regional areas falling to the lowest level since the June quarter of 2011 in early 2017.
This chart from the evolution in the proportion of loss-making making sales in capital cities and regional centres over the past two decades.
“A number of capital cities are now seeing the proportion of resales at a loss trending higher. Conversely, most regional areas of the country are seeing the instances of resales at a loss falling,” said CoreLogic.
Reflective of stronger gains in house prices compared to units in recent years, driven partially by increased supply in the latter in Australia’s eastern capitals of Sydney, Melbourne and Brisbane, the proportion of loss-making sales of houses remained well below those for units during the quarter.
CoreLogic said that just 8.1% of houses sold for a loss compared to 13.3% of units. Across the capitals, those figures fell to just 6.1% and 11.5% respectively.
The table from CoreLogic shows the proportion of properties that sold for a profit, and for a loss, at a more granular level across the nation.
Reflecting strong price growth in Sydney, Melbourne, Hobart and Canberra over the past year based off the ABS’ data, it comes as no surprise that the proportion of loss-making sales in those cities were lower than in other parts of the country, particularly for houses.
Demonstrating the cyclical nature of house prices, CoreLogic found that those properties that were held for a longer period of time generally sold for a profit than those held for smaller period, particularly in capital cities.
“Houses which had resold at a loss had typically been owned for 6.3 years while units resold at a loss had been owned for 6.9 years,” it said. “Of those properties resold at a profit, houses had typically been owned for 9.1 years compared to 7.6 years for units.”
For capital city markets, it said that properties resold at a loss were typically held for a shorter length of time — five years for a house and 6.1 years for a unit. Of those that sold at a profit, the average hold time for a house was 9.1 years and 7.5 years for a unit.
This final chart shows the average hold time for loss-making and profitable sales across individual markets.