Property profits up despite lockdowns

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Capital city auctions were up 85 per cent in the December quarter after a seasonally slower winter.
Camera IconCapital city auctions were up 85 per cent in the December quarter after a seasonally slower winter. Credit: AAP

Australia's real estate resilience has kept on keeping on despite the ravages of COVID but can't last indefinitely, according to a leading property data specialist.

The rate of profit-making resales across Australia rose to 92.4 per cent in the September quarter, up 50 basis points from the previous three months and the highest returns in a decade.

CoreLogic Head of Research Eliza Owen says considering the period was marked by lockdowns across Sydney, Melbourne and the ACT it was a remarkable result.

It was also the fifth consecutive quarter of increases.

Total transactions amounted to 99,000, down from 106,000 resale events in the June quarter, something blamed on distancing restrictions limiting physical inspections.

The national median nominal gain was $270,000 with total resale profits at $27.3 billion. Median losses were -$37,000 or -$368 million in total.

Ms Owen says CoreLogic's Pain and Gain report showed both the combined value of profit and loss fell through the quarter but the decline in total losses was more rapid.

"Resales had a typical hold period of 8.8 years, which was consistent on the previous quarter," she said.

"However as the market finds a peak over the next couple of years, this may incentivise more resales and we may see the average hold period shift higher as more owners look to cash in their long-term gains."

Properties held for more than 30 years had the highest median gain of just over $745,000.

Yet the highest nominal gains per year were achieved at the other end of the spectrum on properties held for two years or less, with the median figure $120,000.

Regional Australia had a higher rate of resale profit, at 93.1 per cent in the quarter but the combined capitals also had a fairly high rate at 91.1 per cent.

The regions have seen a more rapid increase in the rate of profit-making sales, with expectations that the trend is likely to continue.

The highest portion of these was in Bendigo (99.8 per cent) followed by Hume (99.5 per cent) and the Sunshine Coast and Ballarat (99.3 per cent).

With dwelling values showing further increases nationally through the December quarter, profitable sales are likely to keep on rising.

However it can't last forever.

"There are accumulating headwinds for property market performance in the coming months, in the form of higher supply of advertised stock, normalising interest rates, affordability constraints and the possibility of tighter lending restrictions," Ms Owen said.

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

A surge in post lockdown supply coupled with buoyant conditions, led to unprecedented auction activity in the final three months of the year.

Some 42,918 properties were taken to auction across the combined capital cities, an 85 per cent increase from the previous quarter and more than double December 2020 figures.

CoreLogic Research Director Tim Lawless says several factors were at play, including some catch-up from the September period when the largest markets were weighted down by lockdowns as well as a pickup in activity following the seasonally slower conditions of winter.

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