Resales earn $18.2bn in gross profits

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Property resales generated considerable profits in the June quarter, according to CoreLogic’s latest Pain and Gain report. Combined, resales earned sellers $18.2bn in gross profits, and the median profit was recorded at $195,000. In contrast, gross resale losses totalled $469.6m, with the median loss recorded at $35,000.

Across Australia, 89.8% of the dwellings resold transacted for more than their previous purchase price over the June 2017 quarter. “The proportion of total resales for a ‘gain’ was up from 89.5% the previous quarter and unchanged compared to the June 2016 quarter. Houses were more likely to resell for a profit (92.1%) than units (87.5%),” CoreLogic said.

Owner-occupiers came out the strongest, with their overall profits estimated at 92.3%. Investor resales earned significantly less, with profits recorded at 88.1%. Sydney was the only region in Australia where investors were more likely to resell at a profit than owner-occupiers.

Regional areas, particularly those linked to the mining and resources sectors, experienced the lowest profits from resales. “There remains a high willingness from home owners to sell but little demand to purchase, which is resulting in a high proportion of vendors materialising losses,” CoreLogic said.

Rather interestingly, the regions outside but adjacent to Sydney are seeing a lower proportion of resales at a loss. Similarly, Melbourne continues to see fewer resales at a loss; however, the proportion of loss-making resales was lower in both Geelong and Bendigo.

Across the combined capitals, a significant gap in the proportion of profit-making resales was recorded by owner-occupiers and investors: 93.7% of owner-occupiers and 90.3% of investors resold their properties at a profit over the June quarter.   

“Investors were 4.8 times as likely to resell at a loss as owner occupiers in Melbourne, in Brisbane the figure was 2.8 times and in Canberra the figure was 3.5 times,” said Cameron Kusher, head of research at CoreLogic.

“For owner occupiers, the results show the benefits of selling in a buoyant market. In a falling market, owner occupiers may be more prepared to sell at a loss if they are purchasing their next home at an equivalent or greater discount,” Kusher said. “Because of taxation rules, investors may be more prepared to incur a loss because they, unlike owner occupiers, can offset those loses against future capital gains.

“Should home values fall in the future, investors, [who’ve] been increasingly active in the housing market, may be more inclined to sell at a loss and offset those losses which in turn could result in much more supply becoming available for purchase at a time in which demand for housing falls because values are declining.”

CoreLogic’s Pain and Gain report is a quarterly analysis of residential properties resold over the quarter. It compares the most recent sale prices to the previous sale prices in order to determine whether properties have sold at gross profits or gross losses. 

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