Sell Property in Australia

The percentage of property owners selling their homes for a profit in Australia remains at heights not seen in more than 12 years, with recent subtle falls in prices mostly affecting investors offloading high-density apartments, often seen as lower-quality builds.

Profitability Remains High

In the three months to September, the rate of profitability in residential real estate was 93.3%, down slightly from 93.9% in the previous quarter, according to Corelogic’s Pain and Gain report released this week, which analysed the 83,000 residential properties resold in the quarter.

However, the September figure remains within 1% of the 94.2% recorded for the three months to May, which marked a record for profitability not seen since July 2010, when 94.5% of property resales made a profit.

Positive Figures for Property Owners

The head of research at Corelogic, Eliza Owen, said the peak in resale profitability was broadly in line with the housing market in April and that despite the incremental fall in recent months, the profitability figures were still positive for most property owners.

Losses were also broadly softer than the average profit, with the median gain of a property sale being $290,000, compared with a median loss of $40,000.

Losses Mostly Seen Among Investors

The majority of owners who sold for a loss in the quarter were investors who had held their properties for some time, Owen said, with the median hold figure for loss-making properties being 8.3 years. She said that despite rising interest rates and the potential for mortgage stress for new homeowners, the figures did not point to a trend of recent first-time homeowners leaving the market.

“This is really a reflection of more voluntary movements in housing, maybe people who are getting ready to retire so are selling off their assets,” Owen said. “Selling after 8.3 years doesn’t scream urgency or distress to me.”

Apartment Sales and Losses

Owen said that 53.7% of loss-making sales were investment sales, and in her report, noted that “not only did owner-occupiers have a lower incidence of loss-making sales, but the median gain on profit-making sales was higher across the owner-occupier segment ($329,694), than the investor segment ($210,000)”.

Apartment sales were overrepresented in the share of properties that sold for a loss. While units accounted for just 32.1% of resales recorded in the September quarter, they represented 61.9% of the loss-making sales.

Impact of Property Location

Capital city properties accounted for the majority of loss-making sales, with more than a quarter occurring in Sydney.

Owen noted areas including Parramatta and Canterbury-Bankstown in Sydney as places where units had sold for a loss, drawing a link to plenty of new units being built in these suburbs over the past 10 years.

In Parramatta, the average year of build for a loss-making unit was 2011, while the average year of build for a profit-making unit was 1995.

Impact on Tree and Sea Change Locations

Property owners in so-called tree or sea change locations, major coastal or hinterland areas popular with retirees, have also taken a hit. Values have fallen about 6%, slightly more than the 5.7% average for regional Australia, but the proportion of homes that have resold for a loss grew only slightly over the three months to September, from 2.2% to 2.4%.

Overall Market Trends

Despite the slight growth in the percentage of homes that sold for a loss, the overall number of residential properties listed and sold has dropped since house prices began declining in April.

Overall resales fell 17.8% in the three months to September compared with the three months to April.

In conclusion, while recent falls in property prices have affected investors offloading high-density apartments, the percentage of property owners selling their homes for a profit in Australia remains at heights not seen in more than 12 years. The profitability figures are still positive for most property owners, with losses mostly seen among investors. The impact is more significant in capital city properties, particularly in areas with a high concentration of new units. Tree and sea change locations have also experienced a slight increase in homes resold for a loss. Despite these trends, the overall number of residential properties listed and sold has decreased since house prices began declining in April.