According to CoreLogic’s latest Pain & Gain Report, the Australian property resale market saw record profits in the third quarter of 2024. Here are the key findings from this quarter’s report:
- Of the approximately 95,000 property resales nationwide, 95% transactions were profitable.
- Median nominal profits reached a record high of A$295,000, with total profits reaching A$33.98 billion.
- This compares to a median nominal loss of A$40,000 and a total loss of A$270 million.
- Brisbane has been Australia's most profitable city for the second consecutive quarter, with 99.4% of properties reselling at a profit.
- Melbourne and Darwin underperformed other capital cities as the proportion of loss-making transactions increased.
- The average holding period was 9 years, up from 8.8 years in the previous quarter.
Australia's property resale market continues to generate high profitability, even as market growth slows and clearance rates fall.
National profits grew steadily, and losses hit a new low
The report showed that book profits from property resales hit a new high of A$295,000 in the third quarter of 2024, further increasing to A$33.98 billion from A$3.33 billion in the previous quarter.
The proportion of losses fell to 5%, the lowest level since 2008. In contrast, total losses were A$270 million, down from A$292.4 million in the previous quarter. CoreLogic's head of research, Eliza Owen, pointed out that this result was mainly due to the quarterly growth of 0.8% in house prices and relatively stable housing demand.
Brisbane retains its position as the most profitable city, while Melbourne has the highest loss rate
Among the capital cities, Brisbane was the most profitable in the third quarter, with 99.4% of properties resold at a profit, up from 99.2% in the previous quarter and 97.4% in the same period last year.
In contrast, Melbourne's loss-making percentage reached 9.9%, making it one of the highest among the capital cities and the only city to see an increase in the loss-making percentage. Despite this, the total number of loss-making transactions in Melbourne still decreased.
Detached houses are better than units, and investors can better bear losses
In the third quarter, detached houses performed much better than units: only 2.9% of detached house transactions were loss-making, while the loss ratio of unit transactions reached 9.4%.
Unit transactions accounted for 33.51% of total transactions, but contributed 62.11% of losses. The median profit for units was A$200,000, while that for houses was A$345,000, a difference of A$72.51%.
Eliza Owen explained that the higher proportion of unit losses is due to supply factors and the fact that units are more often sold as investment properties, where investors can often use losses to offset future capital gains tax.
The proportion of losses on short-term held properties has decreased
The loss-making percentage for short-term properties (held for less than two years) decreased significantly, from 6.61 TP3T in the previous quarter to 6.11 TP3T, and is significantly lower than the 9.91 TP3T in the same period of 2023. However, the loss-making percentage for properties held for two to four years increased, reflecting increased cost pressures since the 2020 low interest rates.
Owen pointed out that the borrowing rates of these homeowners have exceeded the 300 basis point serviceability assessment buffer, which has become one of the sources of higher loss rates in the recent market.
Resource market supports profit growth
Regional resource markets such as Central Queensland, South Australia and Western Australia have recorded strong capital growth over the past few years, supporting the current recovery in earnings, with median profits in Queensland reaching $173,000 and in regional South Australia $92,000.
Since the loss-making transaction ratio reached as high as 46.1% at the end of 2018, the loss-making ratio in the resource market has dropped to 8.9%, a significant improvement.
Conclusion: The housing market remains resilient, and profitability remains the mainstream
Despite the market slowdown, Australian property resales continue to demonstrate significant profitability. Based on a long-term holding strategy and supported by the resources market, property market profitability remains robust. However, in the short term, it is important to monitor the impact of interest rates and economic growth on market demand, and to observe whether properties with short holding periods continue to be at high risk of losses.
For investors, careful planning of holding periods and region selection remain key strategies for increasing resale profits.
Chinese