In 2021, a staggering number of Australian homeowners profited from the sale of their homes, as historically low interest rates and COVID-19 delays flooded the market with buyers.
Between January and March 2021, according to new research from property data firm CoreLogic, 90.3 percent of all sales generated a profit.
That figure was 89.1 percent in the previous quarter and as low as 86 percent in the three months to June 2020 (during the pandemic’s peak).
Eliza Owen, Head of Research Australia at CoreLogic, said that rising prices have helped owners seeking to sell increase profit margins.
“Between September 2020 and the end of March 2021, Australian dwelling values increased by 8.2 percent,” Ms Owen said.
“Sellers earned a total profit of $30.6 billion in Q1 2021.”
This is actually a decrease from the December quarter’s $32.2 billion, but this is likely due to seasonally lower sales activity at the start of the year.”
CoreLogic discovered that units were more than twice as likely to sell at a loss as houses, and that owner-occupiers achieved a higher rate of profitability than investors.
Despite the near-universal profit margins, Ms Owen cautioned that the market was not risk-free for cash-strapped investors looking to flip a property.
“Despite a broad-based increase in property values, there are still pockets of risk in the Australian housing market. This quarter, we examined the unit market in the Melbourne LGA,” Ms Owen explained.
“The volume of unit resales at a loss had reached a record high of 173. “
However, this is in the context of increasing overall sales volumes, and the proportion was not yet at a peak.
Investor sales in this region may have been triggered by rental values falling more than 20% year over year.
As long as COVID continues to have a negative impact on international travel and inner-city economic activity, this market is likely to experience subdued growth.”
The most profitable locations were idyllic “tree change” or “sea change” locations, owing to an influx of Australians now working from home and COVID-19 acting as a deterrent for many owners to purchase a property based on lifestyle considerations.
In Ballarat, an astounding 99.5% of sales were profitable.
Ms Owen cautioned that the sheer volume of profit-generating sales indicates that the horizon may present difficulties for Australians who are heavily leveraged on their home loan.
“Overall, a broad-based housing market recovery continues to support improved resale profitability,” Ms Owen advised.
“However, with the housing market at extraordinary record highs, buyers should be cautious of potential headwinds. “
These include affordability constraints, eventual mortgage rate increases, and the lingering threat of COVID clusters at the national level.”