Analysing the September 2020 quarter, CoreLogic’s latest Pain and Gain report found that the portion of profit-making property resales nationally rose to 88.1 per cent, higher than the June 2020 result and at the same level as what was seen in 2019.

The combined gains from these profitable sales totalled $24.8 billion, up from $19.8 billion in the previous quarter.

According to Eliza Owen, CoreLogic’s head of research Australia: “Each of the greater capital city markets, with the exception of Melbourne, saw an increase in the rate of profit-making sales over the September quarter. The highest rate of profit-making sales was across Hobart, which has been the case since March 2018.”

She flagged coastal regional markets as “particularly profitable for sellers”, with profit-making sales representing over 95 per cent of resales across six major coastal markets: Geelong, Illawarra, the Mid North Coast, the Newcastle Lake Macquarie region, the Richmond Tweed region and the Sunshine Coast.

For the Sunshine Coast, it was a record-breaking period, with profit-making sales in the September quarter hitting 96.4 per cent.

CoreLogic also flagged that vast increases in the volume of profit and loss from the June to September quarters were a reflection of the increased number of transactions arising post-lockdown.

The number of residential property transactions across Australia was up 41.0 per cent over the September quarter after stage 2 restrictions and a resulting economic contraction slowed sales volumes in the June quarter.

Property in 2020

With improving property values, higher profitability and increased transactions, CoreLogic has taken a look at who emerged as winners in last year’s property market:

Houses v units

CoreLogic found that there was generally a higher rate of return for houses ($225,000) than units ($125,000) over the September quarter.

According to the report, profitability for both houses and units rose across Australia in the September 2020 quarter, with the proportion of total house resales at a gain at 90.4 per cent and total unit resales at a gain at 80.4 per cent nationally.

But CoreLogic said that “units were still about two times more likely to sell for a loss than houses in the September quarter”.

2021 prospects:

“With record-low mortgage rates, a faster than expected economic recovery and relatively low cases of COVID-19, profitability is tipped to trend upwards over the coming quarters,” Ms Owen outlined.

Ultimately, CoreLogic warned that the main risk to a continued improvement in home values and housing profitability is a resurgence in COVID-19 cases and the comeback of stricter social distancing restrictions, which would slow economic and housing market activity.

Investors v owner-occupiers

More investors sold their dwelling at a loss during the September quarter compared with owner-occupiers. Investor sales in the September quarter saw 17.1 per cent of properties sell for a loss, compared with just 10.4 per cent of owner-occupied sales.

Still, despite the higher rate of loss in investor sales, the rate of properties resold at a loss was down from 18.0 per cent in the June quarter, while the rate of loss-making sales among owner-occupiers was down from 11.1 per cent, according to Ms Owen.

She highlighted that the only region where owner-occupiers suffered a higher incidence of loss-making sales was Hobart — following a consistent trend across the past few quarters. Only 3.2 per cent of owner-occupied resales saw a nominal loss, while just 1 per cent of investor sales saw the same.

“The relatively low level of loss-making sales among both cohorts reflects the exceptional capital growth across the Hobart market,” Ms Owen said.

She highlighted: “CoreLogic home value indices show dwelling values across Hobart have seen annualised growth of 7.9 per cent for the five years to December 2020, the highest annualised growth rate of the capital city markets.”

2021 prospects:

In terms of resales, 2021 may see investor resales come under some pressure in the inner-city Melbourne market. With unit rents down by -7.6 per cent across Greater Melbourne and mortgage repayment deferrals expiring, holding investment properties could be considered less viable.

However, this could be offset by record-low mortgage rates, which could support a broad-based recovery trend in the Melbourne market.

In Perth and Darwin, 2021 is likely to see improved profitability due to sustained increases in values and rental incomes, but recovering back to 2014 peaks may take some more time, the report noted.

Hold periods

CoreLogic also used the data to analyse returns by hold period, ultimately suggesting that more time in the market was more likely to result in a greater amount of gain for vendors.

According to Ms Owen, the median hold period of resale events across Australia was approximately 8.5 years over the September 2020 quarter. For profit-making sales, the median hold period was 9 years, while loss-making sales were typically held for just 6.7 years.

Across the capital cities, the shortest typical hold period for a profit-making sale was across Hobart units, where the typical hold period was 6.6 years. Across the house segment, the lowest typical hold period for a profit-making sale was across regional NSW, at 8.3 years.

2021 prospects:

With profitability in the Australian housing markets having the potential to improve over 2021, dwelling owners may have less time to wait before seeing nominal gains on the sale of a property.

“For this reason, it is expected typical hold periods for profit-making sales may slowly decline in the coming quarters,” CoreLogic said.

Regional markets

Painting a picture of the relationship between mining and property, around 37.0 per cent of sales across mining regions had resold at a loss in the September 2020 quarter.

The most significant decline in loss-making sales was across the northern half of Outback Western Australia, where the rate of loss-making sales had fallen from 48.5 per cent in the June 2020 to 38.4 per cent in the three months ending September.

On the other hand, the September quarter was promising for property sellers in the major coastal regions of Australia, as 2020 brought a renewed boost to demand across regions like Geelong, Illawarra and the Sunshine Coast.

Regional dwelling values rose by 6.9 per cent over the year, compared with an increase of 2.0 per cent in values over the year for the combined capitals.

Each of the nine major coastal regional markets analysed saw an increase in the rate of profit-making sales: Geelong, Illawarra, the Mid North Coast, the Newcastle-Lake Macquarie region, the Richmond Tweed region and the Sunshine Coast region recorded over 95 per cent incidence of profit-making sales.

2021 prospects:

The trend in improved profitability across mining sectors looks set to increase, largely off the back of record-low interest rates.

For mining regions, affordable dwelling prices and an increase in mining investment over the year to September may result in higher prices over the coming quarters.

However, due to sustained downturns since the early 2010s, some of these mining markets might have to wait years before values are substantially recovered.