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Pain & Gain Results Reveal Latest Profit and Loss Areas

The CoreLogic Pain & Gain report out today reveals the average profit on resale increases to $262,672 while average loss was $71,529 over September 2016 quarter.

CoreLogic today released its latest Pain and Gain Property Report which delivers the most timely market analysis for residential property resales over the September 2016 quarter by comparing the most recent sale price to its previous sale price in order to determine the magnitude of profits made, or losses incurred by a vendor when selling a home.

No-one will be surprised to read that Sydney recorded the highest value of profit-making resales of all regions in Australia over the quarter, earning an overall profit of $6.22 billion. However, the most dramatic change over the year occurred in Perth and Darwin where the instances of loss on resales almost doubled, while Tasmania’s Hobart recorded a lower proportion of dwellings resold at a loss.

Adelaide was one of only three capital cities to record a lower loss rate this quarter while Melbourne now has the lowest proportion of loss-making house resales of all capital cities at 2.1%.

In Brisbane, the number of loss-making unit resales was more than double that of houses.

Key Findings:

  • $477.9 million in realised losses form resales compared to $17.0 billion in realised profits.
  • Average loss was $71,529 while the average profit was significantly higher at $262,672.
  • 9.4% of national dwellings resold over the third quarter of 2016 transacted for less than their previous purchase price and slightly higher than the 9.3% over the June 2016 quarter.
  • Compared with the same quarter last year, the proportion of loss making sales shifted 1.3 percentage points higher, continuing the trend towards more loss making sales across the Australian housing market.
  • By proportion, loss making sales reached a recent low point over the three months to November 2016 when 7.9% of all resales made a loss.
  • Over 9 out of every 10 homes resold for more than their previous purchase price over the September 2016 quarter.
  • Capital city housing markets recorded lower proportions of loss-making resales than regional areas of the country.
  • Regional homes resales in coastal and lifestyle markets continued to trend lower in the coastal and lifestyle markets.
  • Losses climbing in most regions linked to the resources sector.

According to Mr Kusher, of worthwhile note is that across Australia, those homes that resold at a loss had a typical length of ownership of 6.1 years for houses and 6.5 years for units. Across all gross profit sales realised, the typical length of ownership was recorded at 9.1 years for houses and 7.6 years for units. He said, “These latest results highlight that ownership of property, whether for investment or owner occupier purposes, should be seen as a long-term investment.”

Across Australia’s individual capital cities the proportion of homes reselling at a loss fell over the quarter in Sydney, Adelaide and Hobart, however increases occurred elsewhere.

Mr Kusher said, “Although the occurrence of losses rose over the quarter, in most cites the instances of homes reselling at a loss is low with the exceptions being Perth where almost two out of every five dwellings resold at a loss and Darwin where approximately three out of every 10 resales was at a loss over the quarter.”

Across the individual capital cities, the proportion of loss-making resales over the September 2016 quarter were recorded at:

  • Sydney 2.3% compared to 1.7% Sept 2015.
  • Melbourne 4.9% compared to 4.9% Sept 2015.
  • Brisbane 8.5% compared to 7.3% Sept 2015.
  • Adelaide 7.2% compared to 9.0% Sept 2015.
  • Perth 19.6% compared to 10.8% Sept 2015.
  • Hobart 8.4% compared to 12.0% Sept 2015.
  • Darwin 30.7% compared to 17.4% Sept 2015.
  • Canberra 12.2% compared to 11.4% Sept 2015.

According to Mr Kusher, by comparing individual city figures to those of one year ago, it provides insights into the strong and improving housing markets and those which have weakened. He said, “The cities with the dramatic changes over the year have been Perth and Darwin where the instances of loss have almost doubled and Hobart where there have been far fewer dwellings reselling at a loss.”

“In most instances, houses virtually always show a lower proportion of loss-making resales than units. The likely reason for this is that the value of a house is largely derived from the land and its location. Also, typically houses have increased in value at a faster rate than units. Over the September 2016 quarter, 8.0% of houses resold at a loss nationally compared to 12.7% of units.”

Across the combined capital cities, the CoreLogic Pain & Gain report shows that houses were almost half as likely to be resold at a loss compared to units over the September 2016 quarter, with the figures recorded at 5.6% and 10.2% respectively. Both houses and units have seen the proportion of loss-making resales trend higher over the past year however, units have trended higher at a more rapid pace than units. This data set is available from 1994 and over that period, units have never recorded a lower proportion of loss-making resales than houses.

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