Dwelling profit-making sales down in Q4

Oksana Patron

23 March 2023

The incidence of profit-making sales in the December quarter 2022 nationally declined to 93.1%, down slightly on the results from the September 2022 quarter, with Melbourne registering the largest quarterly increase in the rate of loss-making resales.

According to CoreLogic, which analysed approximately 79,000 dwelling resales in the last quarter of 2022, profit-making resales hit a recent high of 94.2% in May 2022, on a rolling three-month basis.

Further to that, across the greater capital city and rest of state regions, eight out of 15 markets saw an increase in the rate of loss-making resales.

Perth once again had the highest volume of loss-making resales, accounting for almost 20% of the loss-making sales nationally, while Adelaide had the highest incidence of houses sold for a nominal gain at 99%.

According to CoreLogic head of research and report author, Eliza Owen,  despite the increase the portion of loss-making resales in the December quarter remained below the previous decade average of 9.6%.

Owen said key trends in the Q4 report included the increase in the median hold period for resales, which lifted to 9.9 years nationally, compared to 9.2 years in the September quarter and the decline in short-term gains.

“The opportunity for very short-term gains in the property market have notably shifted from the windfalls of early 2022,” she said.

“One in 10 loss-making resales nationally were on properties owned for two years or less. For those who resold for a profit within two years of purchase, the nominal gains were $94,000. That’s still a strong result but it’s a significant decline from the $170,000 gains being achieved in the March 2022 quarter from properties purchased amid the onset of COVID-19.”

At the same time, the difference between house and unit loss-making resales have recorded a 10.35 percentage point gap, one of the largest discrepancies on record.

“Since the start of the current cycle in late 2020 through to December 2022, national house values were 20.9% higher, and unit values only 10.1% higher,” Owen explained.

“After a turbulent cycle, houses ended up with higher value gains, which helps to explain why the rate of loss-making house sales is so much lower than what’s occurring across the unit segment.”

According to CoreLogic, the housing market conditions were broadly expected to improve in the second half of 2023 and into 2024 on the presumption the RBA will have finished lifting rates by this time.

And if that occurs, the market may give way to a rise in housing demand amid improved consumer confidence and the strong return of overseas migration.