Home Sale Profits Dropped $8 Billion
It comes as falling volumes and declining prices reflected a weakness likely to continue in the established homes market.
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The nation’s housing sales fell by $8 billion in the three months to March when compared to the previous quarter according to data provider CoreLogic’s quarterly Pain & Gain report.
It comes as falling volumes and declining prices reflected a weakness likely to continue in the established homes market.
The fall in nominal profits from $38 billion in December echoed the decline in loss-making sales to $261 million from $355 million. Declines in housing values only kicked in after the March quarter, with the extent of loss-making sales predicted to increase.
CoreLogic’s analysis of 106,000 establish home sales in the March quarter showed the proportion of profit-making sales fell to 92.7% from the December quarter’s 94% peak figure.
The March quarter saw the first time profitable housing sales fell in a year and a half — unit profitability declining faster than houses.
The pandemic was the last cause of such a decline, in the three months to August 2020.
The major markets of Sydney and Melbourne are the cities most at risk due to higher interest rates, and therefore made the biggest contribution to loss-making sales over the quarter — the rate of unprofitable sales in both cities rising to 4.8%.
Hobart was the city with the highest proportion of profit-making sales for the 15th straight quarter. Just 1 per cent of the Tasmanian capital’s sales made a loss in the March quarter, down from 1.6 per cent in December.
Further the report fleshes out the different pace of growth between houses and apartments that has made units more affordable into the March quarter. Between the onset of Covid-19 in March 20202 and this year’s March quarter, combined capital city house values rose 25.8% compared to units at 10.6%.
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Capital cities lead the way as median home values see clear upswing
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Home values continue their upwards trajectory, recording the strongest monthly growth in 18 months, CoreLogic data shows.
The property data provider reports that their Home Value Index has noted a third consecutive rise in values in May, accelerating 1.2 percent over the past month. This is on the back of a 0.6 percent increase in March and 0.5 percent rise in April.
Sydney recorded the strongest results, up 1.8 percent, the highest recorded in the city since September 2021. The fall in Sydney’s home values bottomed in January but have since accelerated sharply by 4.8 percent, adding $48,390 to the median dwelling value.
Melbourne recorded more modest gains, with home values increasing by 0.9 percent, bringing the total rise this quarter to 1.6 percent. It was the smaller capitals of Brisbane (up 1.4 percent) and Perth (up 1.3 percent) that reported stronger gains.
CoreLogic research director Tim Lawless said the lack of housing stock was an obvious influence on the growing values.
“Advertised listings trended lower through May with roughly 1,800 fewer capital city homes advertised for sale relative to the end of April. Inventory levels are -15.3 percent lower than they were at the same time last year and -24.4 percent below the previous five-year average for this time of year,” he said.
“With such a short supply of available housing stock, buyers are becoming more competitive and there’s an element of FOMO creeping into the market.
“Amid increased competition, auction clearance rates have trended higher, holding at 70 percent or above over the past three weeks. For private treaty sales, homes are selling faster and with less vendor discounting.”
Vendor discounting has been a feature in some parts of the country, particularly prestige regional areas that saw rapid price rises during the pandemic – and subsequent falls as people returned to the workplace in major centres.
The CoreLogic Home Value Index reports while prices appear to have found the floor in regional areas, the pace of recovery has been slower.
“Although regional home values are trending higher, the rate of gain hasn’t kept pace with the capitals. Over the past three months, growth in the combined capitals index was more than triple the pace of growth seen across the combined regionals at 2.8% and 0.8% respectively,” Mr Lawless said.
“Although advertised housing supply remains tight across regional Australia, demand from net overseas migration is less substantial. ABS data points to around 15% of Australia’s net overseas migration being centred in the regions each year. Additionally, a slowdown in internal migration rates across the regions has helped to ease the demand side pressures on housing.”
Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’
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