Profit-making sales at 14-year high

CoreLogic’s latest Pain & Gain Report for 1Q24 has found 94.3 per cent of transactions recorded a nominal gain during the quarter due to rising home prices outweighing economic challenges and high mortgage rates.

According to CoreLogic, there were around 85,000 resales during the March quarter of 2024, up 8.5 per cent from the same period last year.

The rate of profit-making sales rose from 94 per cent in the previous quarter and 92.5 per cent from the same quarter in 2023, as home values rose 1.7 per cent over 1Q24.

The report found that not only was this the fourth consecutive quarter to record an increase in profit-making sales, it also marked the highest level of profitability in Australian dwelling sales since July 2010.

CoreLogic’s head of research Eliza Owen said: “This increase in the profitability rate across the Australian housing market helps to shore up financial stability for many property owners at a time when higher mortgage costs are starting to take their toll on household budgets.”

Although profit-making sales rose to a 14-year high, the value of combined profits fell from the December quarter, partly due to the seasonal decline in sales, according to CoreLogic.

The estimated combined value of nominal gains from resales was $28.6 billion in the March quarter, down from $30.6 billion the previous quarter.

According to the report, the rate of profit-making sales may increase further in the June quarter of 2024, in line with home values continuing to rise nationally through May.

Meanwhile, nominal losses from resales were $278 million during the March quarter, down from $302 million in December.

Melbourne recorded the highest rate of loss-making sales out of the capital city markets at 9.2 per cent, up from 8.9 per cent on the previous quarter, while Adelaide and Brisbane were tied for the most profitable cities at a loss-making sales rate of 1.6 per cent of resales.

Owen further stated that Perth had shown “a remarkable turnaround” over the last few years with loss-making sales declining to 6.4 per cent from the 43.8 per cent recorded in the June quarter of 2020.

“In the December quarter of last year, Perth managed to improve its position from the second least-profitable capital city for the first time since 2015,” Owen said.

“The rate of loss-making sales has continued to shrink, and it’s overtaken Sydney and Melbourne.

“Perth values may have grown rapidly in the past 12 months, up 22.1 per cent, however the median dwelling value is still one of the more affordable cities in the country relative to local incomes.”

The improvement in profitability was due to the city’s strong metrics, such as home values increasing 6.1 per cent in the three months to May with a median selling time of 10 days, according to Owen.

[RELATED: Perth ‘comparatively’ more affordable than other cities: CBA]