Downsizer upside: More houses sell for a profit AFTER Covid-19

Jan 22, 2021
It's time to have a closer look at the year that was. Source: Getty.

With a global pandemic, a national recession, volatile stockmarkets and property prices all over Australia bouncing around, 202o no doubt felt like a difficult year for over-60s thinking about downsizing or using the equity in their home as a source of a retirement income. But a review of the year’s property sales showed that homeowners were actually in a slightly better position after Covi-19 than before the pandemic. And the outlook for property values looks good.

CoreLogic’s quarterly Pain and Gain report showed that despite predictions of up to a 30 per cent fall in property prices as a result of the coronavirus, the proportion of houses sold in Australia for a profit rose to 88.1 per cent in the three months to the end of September, up slightly from 87.9 per cent in pre-Covid-19 February. September’s figure was also a small increase on 87.2 per cent for the June quarter.

Put in dollar terms, that meant that when the gains from September’s profit-making sales were combined, they added up to $24.8 billion extra in Australian house-owners’ pockets, up from $19.8 billion in the June quarter. (It was still a way off the record $32.9 billion gain home-sellers pocketed in the three months to November 2017, however.)

Regional property-sellers are winners

CoreLogic’s report showed sellers in regional areas were the biggest winners, with profit-making sales beating the national average to hit 89.2 per cent during the three months to end-September.

Regional coastal towns were particularly profitable, with 95 per cent of property-sellers in Geelong, the Illawarra, the Mid-North Coast, the Newcastle Lake Macquarie region, the Richmond Tweed region and the Sunshine Coast making a profit on their property sale. Selling in Sunshine Coast was a near-certain winner, with profitable sales running at 96.4 per cent, the highest rate in the country.

Owner-occupiers were more likely to make a profit than investors, CoreLogic’s review of property data found, and sellers of houses were more likely to make a profit than those who sold units.

“The trend … is a positive turn-around for sellers relative to what was seen in the June quarter data,” the Pain and Gain report said of the September quarter. “The previous edition of the Pain and Gain report had seen an increase in the rate of loss-making sales across almost every capital city, bar Adelaide. However, the portion of loss-making sales across Sydney, Melbourne, Hobart and Darwin are still above pre-Covid levels.”

Meanwhile, property values recorded a corresponding increase on a nationwide basis, after a -2.1 per cent decline between April and September, when coronavirus concerns were dominating national conversation. Promising new figures showed housing values rose 1.1 per cent nationally over the year to end-November, with early data from December indicating that the recovery trend had continued.

The figures also backed the notion that an increasing number of homeowners in capital cities were making a sea- or tree-change. Annual growth in combined regional Australian property prices in November was 5.7 per cent, compared with 2.4 per cent across capital cities. The newfound popularity of working from home, fewer border closers and restrictions and the relative affordability of regional cities were among the factors potentially driving the desirability of the regions.

It wasn’t good news across the board, though, because the Pain and Gain report showed that losses on unprofitable sales across Australia also deepened, from a $885 million loss in the June quarter to a $1.2 billion loss in the September quarter.

The highest rates of loss-making sales were in areas with large numbers of units and in the inner-city areas of the capital cities. The big swings in the dollar-value of both profitable and unprofitable sales was due to the increase in sheer volume of sales in the three months to end-September, CoreLogic said, compared to a relatively restrained sales landscape in the April-June period, as both buyers and sellers worried about Covid-19.

Property profit outlook improves

According to an earlier CoreLogic report, property values throughout 2020 were supported by a mix of record-low mortgage rates, mortgage repayment deferrals offered by banks to Covid-19-impacted mortgagors, government support for low-income households and grants and concessions for owner-occupier purchases.

In the Pain and Gain report, CoreLogic said that the outlook for property sales profits was stronger than it had been late last year, with tailwinds including continued low mortgage rates, a faster-than-expected improvement in economic conditions and stronger consumer sentiment. It added that although there were still some headwinds faced by the property market – such as the tailing off of mortgage holidays and uncertainty around the unemployment rate – but those concerns now looked less pressing.

Eliza Owen, CoreLogic’s head of Australian research, said separately that interventions such as the HomeBuilder grant, how regulators responded to banks’ lending patterns and whether Australians chose to save rather than spend during further periods of uncertainty, would continue to shape property buying behaviours. But she was optimistic about 2021’s property market.

“Overall, the housing market outlook for 2021 is positive, given highly accommodative monetary and fiscal policy, signs of an economic recovery and many first home-buyer incentives remaining in place through to early next year,” Owen said.

Rentals rocky in eastern states

In the rental market, performance in late 2020 varied by state. Sustained lockdowns had a severe impact on rentals in Greater Melbourne, where unit rents fell -7 per cent in the year to November.  Inner-city rental rents in Sydney, Melbourne and, to a lesser extent, Brisbane were also down, mainly due to the closure of international borders that removed the large number of rental properties usually taken up by overseas arrivals.

Results were different in the Perth and Darwin markets, though, where rent performance is mining sector-related and so significantly over the year; Perth rent values jumped 8.2 per cent in the year to November.

Buyers back in the market

Meanwhile, the total value of new loans rose 5.6 per cent in November, according to the most recent Westpac IQ report, surpassing Westpac’s initial forecast of a 4 per cent gain. The increases were across the board, with both owner-occupier and investor loans showing robust increases of 5.5 per cent and 6 per cent respectively. The figures showed a heavy weighting towards new-builds, which was likely a result of the government’s recently instated HomeBuilder scheme.

Stories that matter
Emails delivered daily
Sign up