Investor vs. Owner Occupiers who fared better in the September 2021 Pain and Gain Report?

Australian property owners cashed in on the highest level of profitability in a decade as an overwhelming majority of vendors recorded a profit, CoreLogic’s latest Pain & Gain Report revealed.

In the June 2021 quarter, 93.9% of owner-occupied resales made a nominal gain, compared with 87.7% of investor resales.

CoreLogic analysed approximately 106,000 resales of residential real estate nationally, where the latest sale date of the property occurred in the June 2021 quarter to see the proportion of housing re-sales that delivered nominal gains or losses for sellers.

Despite investors accounting for 28.0% of total resales in the quarter, investor sales made up only 26.6% of profit-making resales and 44.1% of loss-making resales in the June quarter.

Meanwhile, owner-occupier resales accounted for 55.9% of loss-making sales, but 73.4% of total resales in the quarter.

Owner-occupiers had a median nominal gain on resales of $295,000, compared to $200,000 for investors.

This may largely be because the higher proportion of house resales are by owner-occupiers, while investors saw a larger volume of unit resales than houses through the June quarter.

Houses usually have an inherently higher value than units, and in the past decade have seen higher annualised growth rates at the national level (at 5.2%) than units (3.5%).

Additionally, there have been slightly higher holding periods across the owner-occupier segment, with a median hold period of 9 years on owner-occupied, profit-making resales, compared with 8.6 years for investors.

The highest incidence of loss-making resales for both investors and owner-occupiers was across Darwin, though the rate of loss-making investor resales (at 48.2%) was around twice that of owner-occupiers (24.3%).

Resales of investment units across Darwin had an even greater rate of loss, at 55.2% of sales.

There were three broad regions across Australia where investors had a lower incidence of loss-making sales.

These were regional NSW, regional Victoria, and Hobart.

Each of these regions had a very low incidence of nominal loss overall.

In fact, regional Victoria actually had the highest rate of profitability for investors in the June quarter, at 99.2%.

This coincided with a 5.6% lift in regional Victorian dwelling values through the June quarter and a rise of 15.9% in the 12 months to June.

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

Investment resales across regional Victoria had a typical hold period of 8 years, and a median nominal return of $167,000.

For owner-occupied resales, the highest incidence of profit-making sales was also across regional Victoria, at 98.9%.

The greatest typical gains for investors were across the Byron LGA of NSW, where a median nominal return on resales was $721,500 through the June quarter.

It is commonplace for investors to have a higher incidence of loss-making sales than owner-occupiers, with this being a consistent trend in Pain and Gain analysis.

This may be because the investment segment of the housing market is more commonly concentrated in the unit segment, where there have been particular demand shocks in the past decade, as well as relatively elevated levels of unit supply reducing returns through the second half of the 2010s.

Additionally, investors may be more inclined to sell a property at a loss, as it may be offset against future capital gains.

Profitability across both owner-occupier and investor segments of the market is likely to show continued uplifts through the second half of 2021, in line with a broad-based increase in housing values.

You might be interested:

Pain and Gain Report September 2021: National review
Pain and Gain Report September 2021: Houses vs. Units
Pain and Gain Report September 2021: Sydney
Pain and Gain Report September 2021: Melbourne
Pain and Gain Report September 2021: Brisbane

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