Australian Homeowners Profit From Sales Amid COVID-19 Lockdowns

A ‘SOLD’ sticker is seen on a sale sign in front of a house in Canberra, Australia, May 18, 2021. Lukas Coch/AAP Image

A new report by CoreLogic revealed the September quarter saw the highest level of profitability for property sales in more than a decade.

The rate of profit-making resales across Australia rose 92.4 percent during the three months and was the fifth consecutive quarter where the rate of profit-making sales increased.

The national median gain was $270,000 (US$195,000), with total resale profits at $27.3 billion (US$19.7 billion). The median loss was $37,000 (US$26,700), for a total of $368 million (US$265 million) worth of losses.

Corelogic Head of Research, Eliza Owen, said it was a remarkable result given the lockdowns across the Eastern states during the quarter.

“The increase in the rate of profit-making sales is a reflection of strong capital growth across Australian dwelling markets despite COVID-induced disruptions to transaction activity,” she said.

With hard lockdowns affecting Australia’s two most populous states, the number of transactions during this period had fallen to 99,000 from the 106,000 sales in the previous quarter. Melbourne was particularly affected due to the inability of vendors to inspect property across the city physically.

A near-deserted street in the CBD of Melbourne, Australia, on Aug. 6, 2021. Con Chronis/AFP via Getty Images

Resales had a typical hold period of 8.8 years, while properties held for more than 30 years had the highest median gain of around $745,000 (US$537,000).

“However, the highest nominal gains per year were achieved by those on the other end of the spectrum, who have held property for two years or less. The median gain on resales of property held for less than two years was $120,000 (US$86,500),” Owen said.

Sales in regional areas had a higher rate of profit at 93.1 percent, two percent higher than those in capital cities.

“Both broad regions saw an increase in profitability over the quarter, but regional Australia has seen a more rapid increase in the rate of profit-making sales, and this trend is likely to continue as regional dwelling growth saw momentum ramp up toward the end of the year,” Owen said.

When comparing house to unit sales, more house resales returned positive, but Owen said the profitability gap between the two was closing.

“As affordability constraints limit growth in the detached house market and gradually deflect demand towards higher density housing options,” Owen said.

While property values continued to rise throughout December, Owen warned that there were “accumulating headwinds” for the market in the coming months, such as higher supply, affordability constraints, and normalising interest rates.

“A downswing in Australian housing market values would ultimately impact the profitability of resales, particularly for recent purchasers,” she said.