Regional Victoria delivers for investors as profitability hits 10-year high

Profitability for property resales hit its highest level in more than a decade in the June quarter, with regional Victoria recording the biggest proportion of gains for investors.

CoreLogic’s latest Pain & Gain Report, which analysed around 106,000 resales in the June quarter, revealed more than 91 per cent of property resales achieved a profit, with the nation’s house price boom delivering the highest level of profitability since May 2011.

Eliza Owen, CoreLogic’s head of Australian research, said the data reflected the “extraordinary” recovery in house prices after a small downswing occurred at the start of the pandemic.

Ms Owen said the median hold period on all resales in the quarter was 8.8 years, with a national median gross profit of $265,000.

For those properties that sold for less than the previous purchase price, the median gross loss for the June quarter was $43,000.

Ms Owen said the research showed some property owners had pocketed a median return of $123,000 after reselling after just two years.

“For those cashing in after over 30 years of holding a property, the median return was $712,000,” she said.

“Such high levels of profitability may start to encourage vendor participation and bring down typical hold periods, especially as major cities navigate a path out of 2021 lockdowns.”

Regional and tree-change locations recorded the highest instances of profitability, continuing a trend that began emerging last year.

Victoria’s Ballarat statistical area achieved a record high of 99.7 per cent profitability in the June quarter, while 97.6 per cent of Sydney house resales achieved some level of gain, the highest level of profitable resales since 1982.

However, Ms Owen said the pace at which profitability was rising was starting to slow.

“While profitability is expected to trend higher across Australia in the coming quarters, it is clear that the rate of profit-making resales mirrors the trends we’re seeing in city and regional capital growth rates,” she said.

“As the rate of increase in values slows, as we have started to see each month since April, so too will the momentum in profitability.

“We’re monitoring a number of headwinds that may drag on, or even reverse housing market growth in the medium to long-term, including affordability constraints, a tighter credit environment, a resurgence in listings volumes, and some economic factors, including a slowdown in the resources sector.”

Owner-occupiers notched up a higher rate of profitability compared to investors overall, at 93.9 per cent compared to 87.7 per cent.

The research revealed three broad regions where investors had a lower incidence of loss-making resales - regional NSW, regional Victoria and Hobart.

Regional Victoria had the highest rate of profitability for investors in the June quarter, at 99.2 per cent, as house prices rose by 5.6 per cent over the same period.

“Across regional Victoria, investment resales were highest across the LGAs of Geelong, Ballarat and Bendigo through the June 2021 quarter,” Ms Owen said.

“Investment resales across regional Victoria had a typical hold period of eight years, and a median nominal return of $167,000.”

The biggest gains in dollar terms for investors occurred around Byron Bay, with the median return in the three months to the end of June coming in at $721,500.

On the flipside, there were close to 4,900 loss-making unit sales across the country in the June quarter, with unit sales accounting for 30.1 per cent of all resales but 54.1 per cent of all loss-making resales.

Nearly 24 per cent of loss-making unit sales were concentrated in the City of Brisbane, the City of Gold Coast and the City of Melbourne.

“Despite inner-city regions of Melbourne and Brisbane seeing high volumes of loss-making unit sales, the highest proportion of loss from unit resales were actually across Perth local government areas, such as the City of Cockburn, where 69.5 per cent of unit resales made a nominal loss,” Ms Owen said.

“As noted in the previous quarter, a lack of international migration continues to weigh on rental markets across Melbourne.

“The September quarter may show an increase in the proportion of loss-making unit resales across the Melbourne LGA, though volumes could be more subdued due to lockdown conditions during this period.

“At the national level, the portion of profit-making unit sales is expected to gradually increase, in line with continued property value increases observed through to August.”