Record property prices are proving to be good news for vendors, with 94.3% of all vendors in the March quarter selling their home for more than they’d originally paid, according to CoreLogic. That was the fourth consecutive quarterly increase and the highest share since 2010.
However, the share of vendors who made a gross profit varied significantly from capital city to city, reflecting different market performance.
Another significant finding was that house owners were more likely to record a profit than unit owners, by a share of 97.1% to 89.0%.
Also, there was a clear link between the amount of time someone had owned a home and the size of their profit. Vendors made a median profit of $82,000 with a hold period of up to two years, $275,000 for up to 10 years, $435,000 for up to 20 years and $780,000 for up to 30 years.
Property investors very active in the market
Home loan volumes have significantly increased over the past year, especially among investors.
Investors committed to $10.67 billion of mortgages in May, according to the latest data from the Australian Bureau of Statistics. That was 29.5% higher than the year before.
At the same time, owner-occupier borrowing activity rose 12.2%, to $18.13 billion.
Investors were responsible for 37.1% of the home loans that were issued in May. Despite the surge, that’s only slightly higher than the long-term average (in records dating back to 2002) of 35.9%.
By way of comparison, investors’ share of home loan activity bottomed out at 22.4% in 2021 and peaked at 45.9% in 2015, while owner-occupiers’ share reached a low of 54.1% in 2015 and a high of 77.6% in 2021.
If you’re thinking about applying for a home loan, here are three important tips to make yourself more creditworthy in the eyes of lenders:
- Reduce your spending, to free up money to pay off a loan
- Pay all your bills on time, to maintain a good credit score
- Contact a broker, who will compare the market for you
