More Sydney homes are reselling at a profit than at any time in the past 39 years, with the highest incidence of profitability found on the city’s northern beaches.
New data from the latest version of CoreLogic Pain and Gain Ratio shows that 91.5% of the roughly 106,000 resales recorded a nominal profit gain in the June quarter.
Nationally, this is the highest level of profitability in over a decade.
Homeowners who resold after just two years pocketed a median return of $ 123,000, while those who cashed in after more than 30 years of owning a property realized a median return of $ 712,000.
Sydney market defies expectations
Vendors in Sydney fared even better with 94.4% of all sales making a profit.
Home resales rose again with 97.6% in net profits to their owners, which is the highest level since 1982.
The highest incidence of profitability in the Sydney council areas was in the northern beaches, where 97.79 percent of sales made a profit.
Clarke & Humel Director Michael Clarke was not surprised by the report’s findings, having seen prices in Sydney’s northern beaches rise “exponentially since we emerged from that first major foreclosure.”
âIt’s defied expectations,â Mr. Clarke said.
âOnly 12 to 18 months ago, people thought or were told that there was going to be cataclysmic drops not only in economies but also in house prices.
“It’s the exact opposite of what most people thought could happen, it was almost embarrassing that so many people were wrong.”
Profitability in the housing and housing markets increased in the June 2021 quarter, although the incidence of loss-making resales remained significantly higher in the housing segment.
Nationally, deficit home resale rates were 5.6%, down from 6.6% in the previous quarter and 11.6% in the June 2020 quarter.
In the three months to June, 15.3% of units sold at a loss, down from 16.6% in the previous quarter and 21% from the same quarter last year.
Mr Clarke explained that the market for apartments on Sydney’s North Beaches has seen particularly strong growth over the past 12 months, as have single-family homes.
âPeople were surprised at the number of very significant results in the apartment market,â explained Mr. Clarke.
âWith people moving out of the apartment market, they’re not always so focused on downsizing, as they have downsized in the past.
âThese are the types of people who move together to other areas or go into nursing homes or whatever. It’s regularly these apartments that there is still turnover in this space and there has been such pent-up demand that they just go crazy.
In fact, Mr Clarke has never seen so many people “from all over Australia looking to settle on the beaches of the north”.
âI have found that COVID has really brought to the forefront of almost everyone’s minds that if or when they are going to be locked up they want to have the best possible 5km radius and the ultimate Australian lifestyle normally includes a beach, “he said.
The trend for living spaces only strengthened when Mr. Clarke began to receive more and more inquiries from people who were currently based on Sydney’s Lower North Shore.
âI saw a flip. Historically, the places on the Lower North Shore – Mosman, Neutral Bay, Cremorne – people routinely chose these over the northern beaches, âClarke said.
âNow with the change in lifestyle, working from home and people’s desire to be at the beach, we now regularly see higher prices in Manly than in Mosman.
âThe people who moved from the Lower North Shore, they historically came to the northern beaches and found they would get better value than they would on the south side of The Spit. Now the comments we get are, “Oh my god it’s at least as expensive here as it is there and in some cases it’s even more expensive.” ”
CoreLogic’s head of research, Eliza Owen, explained that nationally, sales of for-profit residential properties have increased for four consecutive quarters.
However, even though home values âârose 13.5% in the 12 months leading up to June, Ms Owen said quarterly figures indicated the growth rate was starting to slow.
âWhile profitability is expected to increase across Australia over the next few quarters, it is clear that the for-profit resale rate reflects the trends we are seeing in urban and regional capital growth rates,â Ms. Owen.
âAs the rate of increase in values ââslows, as we have started to see every month since April, the momentum in profitability will also slow.
âWe are watching for a number of headwinds that could slow or even reverse housing market growth over the medium to long term, including affordability constraints, a tighter credit environment, a resurgence in listing volumes and some economic factors, including a slowdown in the resource sector.
Melbourne was one of two capitals to see an increase in the sales loss rate during the June quarter, increasing by 30 basis points to 5.4%.
This was driven by the units sector, with the loss sales rate falling from 12.2 percent in the March quarter to 13.2 percent in the June quarter.
The highest rate of loss-making unit resales was recorded at Melbourne City Council at 34.8%, with 87.1% of those sales owned by investors.
In contrast, Melbourne homes recorded the highest rate of lucrative sales outside capitals at 98.9% in the June quarter.
Lucrative sales in Brisbane rose 90 basis points to 90.1% in the June quarter.
The resale rate of profitable homes was 98%, while unit profitability was 72.6%.
The highest rate of for-profit sales was recorded at Somerset LGA, where 96.6% of resales achieved a nominal gain.
Greater Adelaide had the third highest rate of lucrative sales at 94.6%, with the rate of lucrative resales climbing 1.9 percentage points to 87.7%.
This is despite a slight drop in profitability in the housing sector, which fell 20 basis points in the June quarter.
The town of Tea Tree Gully had the highest rate of lucrative resales at 99.1%, which may reflect the popularity of affordable prices in the northern suburbs of Adelaide.
Market conditions continued to improve in Perth, where the loss-selling rate has averaged 34% over the past five years.
In the 2021 quarter, it fell to 22%, led by the unitary sector where lucrative sales fell from 53.2% in the March quarter to 59.3% in the three months leading up to June.
Lucrative sales also fell from 79 percent to 83.2 percent in the housing segment.
In the town of Nedlands 95 percent of home resales were profitable, followed by Cottesloe at 90.6 percent.
Hobart recorded the lowest rate of loss-making sales for the 14th consecutive quarter, at 2.7% for the three months ending in June.
Hobart also had the lowest difference between for-profit home sales and unit sales of any capital city.
Resales of lucrative homes stood at 97.6 percent in the June quarter, compared to 96.6 percent of resales of units making a nominal gain.
The June 2021 quarter was the 22nd consecutive quarter Darwin recorded the highest loss-making rate of any capital city, despite falling 4.7 percentage points to 33.9%.
But Darwin recorded good news, with the biggest drop in pain for vendors during the period.
Home values ââclimbed 6.3% in the June quarter and 25.7% between February 2020 and August 2021.
The for-profit home sales rate fell from 67.7% in the March quarter to 75.6% in the June quarter.
Unfortunately, the units segment did not fare as well, with the lucrative sales rate falling to 48%.
Profitability continued to increase in ACT both in homes and in units.
Home resales recorded nominal gains on 98.7 percent of properties, while 91.2 percent of home resales recorded a profit in the June quarter.
The rate of lucrative sales in all homes fell from 88.6% in the September 2019 quarter to 95.4% in the June 2021 quarter.
Other key findings
- The median retention period for these resales was 8.8 years
- In Ballarat, 99.7% of residential properties resold in the June quarter saw a gain for sellers
- In the Victoria area, 98.7% of all home resales in June registered a nominal gain
- The main drivers of record gross resale profits are tight listings and low mortgage rates.
- Sales at a loss were affected by border closures and weak downtown rental markets.