Buy and hold proving a winning formula for many home owners
The vast majority of property resellers are achieving a gross profit on their transaction, especially those who have owned their property for an extended period of time.
In the September quarter, 92.6% of homes were sold for a gross profit, according to CoreLogic. That was little changed from the previous quarter (92.9%), but well down on the peak in December 2021 (99.3%) when the market was booming.
Crucially, properties that were sold for a profit had been owned for a median of 8.1 years, while those resold for a loss had been owned for a median of 2.0 years.
CoreLogic said the median hold period for losses had now been at or below two years since 2021, reflecting the fact that in a weaker market, any owner who had bought and sold in that shorter time period would find it hard to recoup their purchase price.
“Presumably, many of these resellers had intended to hold for longer, but perhaps due to changed personal circumstances they had to sell (e.g. illness, divorce, or similar),” CoreLogic said.
“Of course, a change in an owner’s financial situation could also play a role in a short hold period and an increased risk of a resale loss – and at the moment, rising/high interest rates would be a clear candidate for driving some of these sales. We can’t be sure when this is the case, but it’s likely to be happening to some degree. Of course, with unemployment still sub-4% (at least for now), ‘distressed sales’ will still be the exception rather than the norm.”
Owner-occupiers v investors, houses v apartments
Drilling down further, the data also showed different results for different types of owner and property.
- 93.0% of owner-occupiers made a profit, compared to 91.2% of investors.
- 93.6% of houses made a profit, compared to 78.2% of apartments.
“Fewer owner-occupier properties are selling for a resale profit than has been the case for almost eight years, although the frequency is still quite high. Investor resales made for a loss are also at an eight-year high or the share made for a profit at an eight-year low,” CoreLogic said.
“There is a tendency for apartments to be resold at a loss more often than houses, perhaps reflecting a greater proportion of investor ownership (and hence more likelihood of a quick/financially-minded sale), but there are certainly few signs of apartment owners ‘abandoning ship’.”