The proportion of homes sold for a profit surged to a decade-high during the June quarter, bolstered by soaring house prices, tight listings and record low interest rates, the latest CoreLogic Pain and Gain report shows.
More than nine in 10 (91.5 per cent) homes sold were profitable, a 90 basis point increase from the March quarter.
In Sydney, 97.6 per cent of houses were sold for a profit – the highest level in 39 years. Profit-making unit sales rose by 50 basis point to 90.2 per cent.
Burwood, Parramatta and Strathfield posted the highest proportion of loss-making sales at 18.3 per cent, 14.6 per cent and 12.7 per cent respectively.
Homes in the northern beaches, Camden and Hawkesbury council were the most profitable, with 97.7 per cent selling for more than the purchase price.
Profitability rose across 12 of the 15 capital cities and rest of the state markets, with the rate of loss-making sales rising in Melbourne, Hobart and regional Tasmania, albeit from a low base.
Regional and tree-change markets posted the highest proportion of profit-making sales, with regional Victoria’s Ballarat region achieving 99.7 per cent of homes selling for more than the purchase price.
The report, which analyses the proportion of housing resales that delivered nominal gains or losses to sellers, is based on around 106,000 dwelling resales in the June quarter.
The number of homes sold for more than they were bought for has climbed to 97,000 – up by 10 per cent from the previous quarter.
Vendors made a total of $39.4 billion in nominal gains – a 12.6 per cent rise from the previous quarter. However, the loss on sales grew to $1.1 billion, which also increased on the previous quarter.
Nationally, the median profit on resales was $265,000 in the three months to June, while median losses were $43,000.
“This number really does reflect the extraordinary recovery in housing values following a small down-swing induced by the initial impact of COVID-19,” the report’s author, CoreLogic head of research Eliza Owen, said.
“The record resale gross profits were also driven by tight listings and low mortgage rates.
Homes typically held for 8.8 years had achieved a median gross profit of $265,000. However, Ms Owen said the market’s recent extraordinary growth allowed property owners who were reselling after only two years to pocket a median return of $123,000.
Among those highly profitable resales was a home at 25 Lamrock Avenue, Bondi Beach, that sold for $5.6 million in October 2020.
The property re-traded for just over $9 million this month – a $3.4 million gross profit in less than a year, according to Ric Serrao, principal of Raine & Horne Double and Bondi Beach.
Mr Serrao also sold a property at 65a O’Brien Street, Bondi Beach, for $5.6 million. It was bought for $3.8 million just 12 months ago.
“I have never seen a market where people have made so much money and so quickly,” he said.
Ms Owen said such high levels of profitability might start to encourage vendor participation and bring down typical hold periods, especially as major cities navigated a path out of 2021 lockdowns.
“While profitability is expected to trend higher across Australia in the coming quarters, it is clear that the rate of profit-making resales mirrors the trends we’re seeing in city and regional capital growth rates,” she said.
“As the rate of increase in values slows, as we have started to see each month since April, so too will the momentum in profitability.
“We’re monitoring a number of headwinds that may drag on, or even reverse housing market growth in the medium to long term, including affordability constraints, a tighter credit environment, a resurgence in listings volumes, and some economic factors including a slowdown in the resources sector.”
This article is from Australian Financial Review, please click the following link for the original article: https://www.afr.com/property/residential/sellers-reap-millions-as-sydney-house-profits-surge-20210928-p58vay