Vast majority of homes continue to sell at prices above previous purchase prices: CoreLogic
The CoreLogic Pain and Gain Report is a quarterly analysis of residential properties which were resold over the quarter.
It compares the most recent sale price to the previous sale price in order to determine whether the property sold at a gross profit or gross loss.
It provides a proxy for the performance of each housing market and highlights the magnitude of profit or loss the typical seller of a home makes across those regions analysed.
Over the June 2016 quarter, 9.5% of all dwellings resold recorded a gross loss when compared to their previous purchase price. This figure was higher than the 9.3% at the end of the first quarter this year and the highest proportion recorded since March 2014. Across those dwellings which resold at a loss over the quarter, the total value of loss was $459 million with an average loss of $73,009.
Given less than 10% of homes resold at a loss over the quarter, more than 9 out of every 10 homes resold for more than their previous purchase price. Across these sales, the total profit was recorded at $15.7 billion and an average profit of $262,550 per resale. Also important to note is that over the quarter, 29.4% of resold homes transacted for more than double their previous purchase price.
The data also highlights the fact that ownership of property, whether for investment or owner occupier purposes, should be seen as a long-term investment. Across the country, those homes that resold at a loss had an average length of ownership of 6.3 years.
Across all sales recording a gross profit the average length of ownership was recorded at 10.3 years, while homes which sold for more than double their previous purchase price were owned for an average of 17.7 years.
The capital city housing markets continue to record a lower proportion of loss-making resales than regional areas of the country. The trends in regional areas are shifting with the proportion of loss-making resales trending lower in most areas linked to tourism and lifestyle.
On the other hand, housing markets linked to the resources sector are generally seeing an elevated level of loss-making resales after housing market conditions in many of these locations have posted a sharp correction.
National overview
Nationally, 9.5% of all houses and units resold over the June 2016 quarter, transacted for a lower price than they were previously purchased for. The 9.5% of resales at a loss was up from 9.3% at the end of the March 2016 quarter and the highest proportion of loss-making resales since March 2014.
Although the instance of loss-making resales has increased a little, the vast majority of homes continue to sell for prices above the previous purchase price.
The split between resales of capital city and regional homes shows that the proportion of loss-making resales is much lower in capital cities (7.1%) than in regional areas (14.1%). Both capital cities and regional areas have recorded a rise in loss-making resales over the quarter, up from 6.9% and 13.3% respectively at the end of March 2016.
Despite the rise over the quarter the proportion of loss-making resales is much lower than recent peaks in both the capital city and regional markets.
Capital cities have consistently recorded a lower proportion of loss-making resales than regional markets since the three months to March 2009. The 7.1% of resales at a loss is the highest proportion for capital cities since the three months to October 2013 and in regional areas the proportion of resales at a loss is at the highest level since the three months to July 2015.
Homes that sell for less than their previous purchase price are on average held for a shorter length of time than those reselling for a profit which highlights the long-term nature of housing investment.
Over the quarter, capital city dwellings which resold at a loss had been owned for an average of 5.7 years compared to 10.3 years for those sold at a profit and 17.4 years for those selling for more than double their previous purchase price.
Across the regional markets, the average hold period of loss-making resales was 7.0 years compared to 10.3 years for those resold at a profit and 18.4 years for those selling for more than double the previous purchase price.
Nationally there was $458.9 million in realised losses over the quarter at an average of $73,009 and $15.7 billion in realised profit at an average of $262,550. Across the combined capital cities there were $251.3 million in losses at an average of $83,198 compared to $12.8 billion in profit at an average of $321,917.
The combined regional areas recorded $207.7 million in losses at an average of $63,587 compared to $2.9 billion in profit at an average of $144,305. The average losses were greater in the capital cities, however they also generally experienced much greater profits, more than double those in regional areas.
Houses are seeing a proportionately lower number of loss making resales compared to units both across the combined capital cities and combined regional areas of the country.
The proportion of houses resold at a loss across the combined capital cities has increased over the past quarter while unit resales at a loss have remained steady. Over the June 2016 quarter, 5.9% of capital city houses resold at a loss, up from 5.7% over the March 2016 quarter and 9.5% of units resold for less than their previous purchase price.
There has been no recorded period in which capital city houses have recorded a higher proportion of loss-making resales than units.
The June 2016 quarter recorded $164,239,771 in realised losses from resales of capital city houses and $87,017,927 in realised losses from capital city units.
The average loss was recorded at $94,936 for houses and $67,456 for units, with the average loss for houses the highest since the three months to July 2004.
In comparison, there were $9,953,211,125 in realised resale profit for capital city houses at an average of $363,442. For capital city units, total resale profit was recorded at $2,828,164,261 and an average of $229,596.
12.2% of houses and 19.9% of units resold within regional housing markets over the June 2016 quarter transacted below their previous purchase price. These represented the highest proportions of total resales at a loss since the three months to August 2015 for houses and the three months to February 2016 for units.
The regional housing markets recorded $139,475,875 worth of house resales at a loss over the June 2016 quarter and $68,199,797 units resold at a loss over the quarter. The average losses were recorded at $64,423 for houses and $61,944 for units.
Looking at resales turning a profit in regional Australia over the June 2016, there were $2,400,837,922 in realised profits for houses and $475,731,130 in profit for units. The average profits were recorded at $154,773 for houses and $107,680 for units.
The proportion of loss-making resales has increased across each capital city except Melbourne and Canberra over the most recent three months. While the proportion of loss-making resales has generally risen, on an historic basis most cities are still seeing quite a low instance of homes reselling at a loss.
The exceptions are Perth and Darwin where the proportion of loss-making resales are at or close to historic highs. In Perth, an historic high 20.1% of homes resold at a loss and in Darwin 24.2% of homes resold at a loss, the highest proportion since December 2002.
The proportion of loss-making resales over the June 2016 quarter across the remaining capital cities was recorded at: 2.4% in Sydney, 4.4% in Melbourne, 8.4% in Brisbane, 10.6% in Adelaide, 10.8% in Hobart and 9.6% in Canberra.
Across the non-capital city markets the proportion of loss-making resales has increased over the quarter in New South Wales, Victoria, Queensland and Western Australia, is unchanged in South Australia and has declined elsewhere. Across the individual areas, the proportion of resales at a loss over the quarter were recorded at: 7.3% in regional NSW, 9.3% in regional Vic, 19.8% in regional Qld, 21.7% in regional SA, 33.8% in regional WA, 19.6% in regional Tas and 21.2% in regional NT.
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