Property sellers start to rack up profits

Australian property sellers were able to take advantage of the recent boom in prices, allowing them to achieve higher level of profits than those who sold prior to the pandemic.

Data from PropTrack showed that the typical profit of sellers during the period covering March to July 2022 was around $260,000 — higher than the $187,000 over the March 2020 to March 2022 period and the $130,000 over the two years to March 2020.

PropTrack economist Paul Ryan said sellers over recent months were also less likely to sell at a loss.

“The proportion of recent sales that have resulted in a capital loss is one-third the rate seen in the two years prior to the pandemic – and half the rate seen over the two years of COVID,” he said.

“This is not surprising given the exceptional price growth across Australia over the past two years, with 2021 seeing the third-fastest episode of price growth in history.”

Over the two years to March 2020, the share of sellers making a loss was at 16.6%. This went down to 10.4% over the next two years. Between March and July 2022 of the current year, only 5.9% of properties were sold at a loss.

Unit sellers are more likely to experience a loss — over the past four months, close to 14% of unit sellers posted a loss, higher than the 3% among house sellers.

“This does not appear to be due to shorter holding periods of units among recent sales, but rather that price growth has been much lower for units than houses over the pandemic period,” Mr Ryan said.

This was also a part of the wider trend in preferences of buyers towards larger homes and lifestyle locations since the onset of the pandemic.

Interestingly, PropTrack data show that recent sellers have also held their properties for an unusually longer period, indicating that there were no rushed sales of properties during the pandemic.

“Properties held for six to eight years are over-represented in recent sales. Many of these sales will have been made possible by the strong equity gains over the past two years, providing deposits for upgrades,” Mr Ryan said.

“A curious feature of the data is that sellers appear to prefer to hold on to property rather than accept a price below what they paid.”

As the market goes through a downturn, Mr Ryan said the ability to gain profit will be a key factor for those property investors who are planning to sell over the coming months.

“So far this year, profits have been strong — it would take significant price falls beyond what we are expecting from here to put a dent in these results for sellers this year,” he said.

The following markets achieved the highest profits over the period covering March 2022 to July 2022:

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