More properties selling for a profit, as downturn comes to an end

The latest CoreLogic Pain & Gain Report has revealed that the percentage of vendors selling their home for more than the original purchase price is rising again.

Since a record 99.3% of owners sold for a gross profit in the final quarter of 2021, this percentage had been falling every quarter, reaching 92.4% in the September 2023 quarter. However, in the December quarter, the percentage increased, to 93.3%.

Interestingly, the share of owner-occupiers and investors who sold for a profit was very similar (92.8% vs 92.9%), whereas there was a big difference between the share of house owners and apartment owners who sold for a profit (93.9% vs 74.2%).

For the owners who sold for a profit – regardless of property type – their median hold period was 8.5 years and their median profit was $305,000. For the owners who sold for a loss, the median hold period was 2.3 years and the median loss was $50,000.

Why property is a long game

CoreLogic Chief Property Economist Kelvin Davidson said the data confirmed the strong link between time in the market and profitability.

“In other words, with property values tending to rise over time, anybody who has owned their property for the ‘typical’ period of seven to eight years will almost inevitably get a higher price than they originally paid (with short hold periods more likely to lead to gross losses),” he said.

“Hold periods to achieve a gross profit do seem to have started to lengthen in the past few quarters, though this may have been influenced by the wider market downturn incentivising prospective vendors to hold longer in order to achieve a profit. When you compare the hold period for resale losses versus resale gains, clearly a longer hold period gives time for capital gains to accumulate, whereas shorter hold periods tend to have greater risk of losses.”

Mr Davidson also said the increase in the share of owners selling for a profit suggested the property downturn had ended and the market was growing again.

“More than nine in ten properties are selling for a profit, although it must be noted this is still quite low compared to the longer-term average and reflective of the fact that national values are still about 11% below their peak. However, the higher portion of profitable resales we’re starting to see is consistent with the rise in property values themselves since September’s trough, alongside wider market forces such as the peak for mortgage rates, high net migration, a resilient labour market and easing credit conditions,” he said.

If you know any clients who are thinking about buying, please introduce them to me so I can help them with a home loan. By the way, I can also help your clients with bridging finance – which means they can buy before they sell.