Perth’s negative equity crisis has eased, with analysts reporting that Australian homeowners overwhelmingly sold their properties at a profit in the three months to December 2020.
According to CoreLogic, the national rate of profitable sales rose to 89.9 per cent over the December quarter, up 1.6 per cent from mid-year figures.
The uplift in profitability coincided with a 2.3 per cent bump in countrywide home values, with total gains from resales breaching $31.9 billion, up from $24.8 billion in the previous quarter.
By comparison, resale losses shrank from $1.2 billion to $1 billion.
It’s good news for Perth homeowners, with WA sharing more than half of the nation’s negative equity with the Northern Territory as recently as 2019, according to the Reserve Bank of Australia.
Bourkes Property Sales Executive Tony de Graaf said he expected more sellers to make profits or mitigate losses as the Perth market flourished, with current conditions effectively addressing poor negative equity statistics.
“At the very least the capital appreciation over the last six months in residential real estate has increased the equity that homeowners have,” he said.
“The reduction in property values in recent years has largely been overcome.
“Where I am seeing significant buyer activity is in those properties that are selling around the $2 million mark.
“There are multiple offers being presented, properties are selling in days not weeks and, if priced strategically, the asking price is really the baseline of what sellers can expect to sell for.”
Mr de Graaf said a strong sale in the current climate largely depended on what sellers bought, when they bought it and whether they paid a premium at the time of purchase.
Buyers who had bought in 2012 or 2013 were considered very lucky to be breaking even, with people doing best when selling homes that were well located, had a desirable design or had value-adding potential through development or renovation.
Though more sellers may be making a profit, Mr de Graaf said residents should be mindful that buying in this market was also likely to leave people shelling out more than they previously expected.
He said the real challenge was estimating whether values were likely to continue to grow, with the sales executive sharing that abysmally low listing levels – held responsible for the market explosion – had already started to rebound.
While the window to fast value recovery may be closing, homeowners in Perth and wider Australia are enjoying the highest level of profitability since the 2018 June quarter.
CoreLogic reported the owner-occupier cohort was reaping higher numbers of profitable sales than investors, while regional markets across the country were also high-performing.
Weighing into the conversation, Realmark North Coastal Director Jeanette Bates said she had seen many Perth property owners benefiting from the end of a sustained downturn.
She said Perth appeared to be getting the greatest return for sellers and there was expectation the rate of profit-making sales would only increase.
“At Realmark North Coastal our last 36 auctions have seen a clear increase in profit-making, with one homeowner experiencing over a 20 per cent profit in a period of three years,” Ms Bates said.
“For increased profit it is crucial the property is marketed widely to a range of buyers and not sold quickly.
“Sellers that choose to market their property over a three or four-week period are clearly returning higher profits than those that are sold off market.
“Many sellers had plans to sell within the last six years but, due to declining values, they have held and are now realising the gains we are seeing now.”
Though values in Perth are certainly leaping, Ms Bates maintained the city was still far more affordable than its east coast counterparts.
She said the market upswing was largely the result of owner-occupier activity, leaving a rather urgent need for investors to return and address the imbalance between supply and demand.
“Overall stock levels are well below average at a historic low, which is adding to the urgency to purchase,” Ms Bates said.