Bendigo top performer in the regions, but will it last?

CoreLogic’s latest Pain & Gain Report shows that the rate of profit-making sales across the Australian property market has fallen for the first time since August 2020, providing yet another sign that there’s been a turning point in housing conditions.

The report, which analysed approximately 106,000 property resales that occurred in the March 2022 quarter, registered a modest 30 basis point decline in the rate of profit-making sales, the first since the three months to August 2020.

Head of Research Eliza Owen says that while it was only a slight decline and the incidence of profit-making sales fell to 93.7 per cent, there were several factors pointing to further falls in the coming months.

“Our quarterly Pain & Gain Report is another sign of a changing market for sellers,” she said.

“The figures align with other key indicators such as the slowing growth rate of values, the increasing time it takes to sell a property and a fall in sales volumes at a time when access to credit has become harder and interest rates are on the rise.

“In May, Australian dwelling values posted the first monthly decline in value since September 2020.

“Against a backdrop of rising interest rates, tighter credit conditions and affordability pressures we are likely to see the instance of nominal gains from dwelling resales erode throughout 2022, which will have an even greater impact on buyers who have entered the market more recently.”

In dollar terms the median gains from resales nationally were $290,000; highest for Sydney dwellings ($415,000) and lowest across Perth ($119,000). Nationally, median losses on resales through the quarter stood at -$33,000.

Higher hold periods have typically resulted in higher nominal capital gains with properties held for a period of 30 years or more achieving median gains of $781,750.

Ms Owen says outside of this, properties held between 24 and 26 years or purchased between 1996 and 1998 also achieved extremely high gains.

“Properties were acquired relatively cheaply at this time because of a significant housing market downswing through the mid-90s,” she said.

“Our analysis shows the median hold period nationally is 9.0 years, when properties were purchased during the March quarter of 2013.

“Since then Australian dwelling values have increased 70.3 per cent, or the equivalent of around $309,000 in the median dwelling value across Australia.”

Australia’s capital cities are driving the deterioration in profit-making resales, falling 60 basis points to 93.3 per cent in the first quarter of 2022.

Leading the way was Melbourne where the rate of profit-making resales fell a full percentage point followed by Sydney’s fall of 60 basis points.

Regional areas remained strong, with the rate of profit-making sales lifting 10 basis points higher in the quarter, to 94.2 per cent.

While conditions across regional coastal centres are starting to shift amid higher interest rates, resale profitability remained extremely high through the March quarter in some areas.

Every single resale in Bendigo recorded a nominal gain at a median of $301,000 following an increase in dwelling market values of 31 per cent over the recent upswing.

In Geelong 99.9 per cent of resales made a nominal gain, a record high for the region, and the highest of the coastal dwelling markets through the quarter.

Geelong has seen cumulative value growth of 33.9 per cent over the course of the housing market upswing between September 2020 and March 2022.

However, Ms Owen notes like many major regional centres, the consistency of resale gains may shift in the coming months following the region’s -0.1 per cent decline in dwelling market values, the first decline since 2020.

“Price declines across the market signal there could be a higher probability of loss-making sales in the coming months, though hold periods will play an important role here,” Ms Owen said.