CoreLogic has released its property Pain & Gain report for May, which revealed that regional property owners reaped record profits on sales in the final quarter of 2021:
93.8% of resales nationally over the December quarter made a nominal gain for a total nominal profit of $38 billion. This was up from 92.4% in the previous quarter and marked six consecutive quarters of increases in the rate of profitability, starting from the September quarter of 2020.
Regional Australia saw nominal gains for 94.0% of sales, compared with 93.7% of capital cities.
A breakdown by region is shown below:
Commenting on the results, CoreLogic’s head of research, Eliza Owen, noted:
Despite the strong profitability results, it is not a record high. The highest rate of profitable sales occurred in the three months to April 2004, when 97.2% of resales sold for a nominal gain.
This rate of profitability occurred off the back of Australia’s longest housing market upswing on record, which was almost uninterrupted from September 1995 to January 2004, and saw housing values nationally increase 109.7%.
Owen also warns that profitability will soon peak owing to rising mortgage rates:
Higher average mortgage rates, rising advertised stock levels and affordability constraints are already seeing values slip across Sydney and Melbourne and the impact of interest rate tightening may also affect profitability for more recent buyers.
In the April Financial Stability Review, modelling from the RBA suggested a 200-basis point increase in the cash rate from current levels could lead to a 15% decline in real house prices over a two-year period. A 15% decline in the current median dwelling value across Australia would take prices close to May 2021 levels, and those having purchased around that time may see an increased chance of making a nominal loss through to 2024.
It was a fun ride while it lasted.
