Australia’s property market is facing the lowest proportion of profit-making sales since March 2013, according to a report by CoreLogic.
Its March 2019 quarter results identified that 87.9 per cent of resale properties made a gross resale profit of $14.3 billion, down on the previous quarter (89.5 per cent for December 2018) and against the previous year (91.0 per cent March 2018), making it the lowest since March 2013.
The latest Pain and Gain report, for the March 2019 quarter, provides an analysis of properties resold within a quarter and compares it with their current and previous sale price.
It found that Sydney and Melbourne are responsible for nearly half of the profits, with the share of national total profits coming in at 24.3 per cent and 23.5 per cent, respectively.
“[This is] thanks to their higher cost of housing, plus the strong growth in dwelling values prior to the recent downturn,” report author and research analyst Cameron Kusher said.
“When relatively few properties are selling at a loss (pain), it’s a general indicator of a stronger housing market. [But] if a higher proportion of properties are reselling at a loss, it’s a sign of weaker housing market conditions.”
Australia also had a total of $486.8 million in realised gross losses from resales over the March quarter, with the highest share of losses nationally seen in Perth (24.8 per cent) and Sydney (19.9 per cent).
“The share of losses in many of these areas is now lower than at the peak, but their material decline in values results in elevated losses, a reflection that housing values remain well below their peaks in these areas,” the report stated.
Areas recording the lowest proportion of losses are in regions surrounding Sydney and Melbourne.
“In fact, some of these are recording even fewer resales at a loss than the capital cities themselves,” Mr Kusher said.
As at March 2019, 91.1 per cent of all capital city houses resold over the quarter were at a profit, down against the previous quarter’s 92.5 per cent and the 94.4 per cent seen a year earlier.
Every capital city saw an increase in the share of loss-making resales over the March 2019 quarter compared to the previous quarter. Hobart was the only capital city in which the share of resales at a loss is currently lower than the March 2018 quarter.
“The share of resales at a loss in Melbourne was the highest since August 2014, for Brisbane since November 2013, for Adelaide since June 2016, and in Perth, we haven’t recorded this level of resales at a loss, ever,” the report stated.
“Although combined capital cities continue to record a lower proportion of resales at a loss than regional markets, loss-making resales across the combined capital cities increased by more than regional markets, and we expect this to climb further as the housing market conditions deteriorate with the negative impact of lower values flowing through to resales.”
As for regional performance across Australia, 89.8 per cent of houses resold at a profit over the March 2019 quarter, down from 90.1 per cent the previous quarter and from 90.9 per cent a year earlier.
The report also found “a reasonable gap” between the proportion of houses reselling for a gross profit (sitting at 90.5 per cent) and units (a much lower 79.5 per cent).
“Both dwelling types are seeing the rates of loss climbing quite rapidly, but units continue to be much more likely to resell at a loss than houses,” the report stated.