More than 93% of homes now selling for a profit

With property prices rising again, the share of vendors selling their home for a gross profit has also been increasing.

In the final quarter of 2023, 93.3% of homes were sold for a profit, up from 92.4% in the previous quarter. That was the first increase since the final quarter of 2021 – near the end of the previous boom – when a record 99.3% of homes were sold for a profit.

For vendors who sold their home for more than they'd originally paid, their median profit was $305,000 and their median hold period was 8.5 years. For vendors who sold at a loss, their median loss was $45,000 and median hold period 2.3 years.

The share of profitable resales was virtually identical for owner-occupiers (92.8%) and investors (92.9%). However, there was a big difference in profitability between owners of houses (93.9%) and apartments (74.2%).


Why the share of profitable resales has been rising

CoreLogic Chief Property Economist Kelvin Davidson said the rise in profitable resales suggested the market had bottomed out and was again rising.

“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.

Mr Davidson added that the amount of time owners hold onto their property also impacted the likelihood of selling for a profit.

“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.”

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Published: 23/2/2024