CoreLogic has revealed the Australian suburbs that are still seeing properties sell for six to seven figure profits. But sellers may need to brace themselves for returns to diminish soon off the back of the latest cash rate hike.

According to CoreLogic research, in the three months to December 2021, multiple suburbs in the Hills district of Sydney saw house sale profits hit almost $1 million. A handful of Victorian suburbs also made the list, but it was dominated by New South Wales properties.

Areas where every house sale made a profit, 4Q21

Source: CoreLogic.com.au

For units, Surf Coast in Victoria saw the greatest median sale profits in the December 2021 quarter of $623,000. This was followed by the popular areas of Byron in New South Wales ($545,000) and Noosa in Queensland ($490,000).

Areas where every unit sale made a profit, 4Q21

Source: CoreLogic.com.au

In an Australian Financial Review article, CoreLogic data found that during the three months to December, vendors made a total of “$38 billion in resale profits nationwide”. This was CoreLogic’s highest quarterly gain on record – 28% higher than the previous quarter.

Are high sale profits here to stay?

While the popularity and profitability of blue-chip suburbs are more evergreen than other areas, many experts are forecasting that we will see a fall in housing prices across Australia this year.

After a record run of price growth over the last few years, Sydney and Melbourne home values have already started to edge lower, albeit modestly.

CoreLogic data shows that Sydney home values fell for a third month in a row by 0.2% in April, 0.2% in March and 0.1% in February. Melbourne values were flat for April but technically down over three of the past five months.

This week, the Reserve Bank of Australia hiked the cash rate by 25 basis points to 0.35%, the first increase in over 11 years. For a generation of homeowners and would-be buyers, this is the first interest rate hike many will have experienced.

But in terms of property prices and sale profits, higher interest rates could mean more cold water poured on the housing market.

According to Tim Lawless, CoreLogic’s Research Director, “Stretched housing affordability, higher fixed-term mortgage rates, a rise in listing numbers across some cities and lower consumer sentiment have been weighing on housing conditions over the past year.”

“As the cash rate rises, variable mortgage rates will also trend higher, reducing borrowing capacity and impacting borrower serviceability assessments,” he said.

The big four banks, several of their subsidiaries and many competitor lenders have already announced they will be passing on this rate hike to their variable rate home loan customers. And cash rate hikes are expected to occur periodically over the next two years, which may further put a handbrake on house prices.

“With higher inventory levels and less competition, buyers are gradually moving back into the driver’s seat. That means more time to deliberate on their purchase decisions and negotiate on price,” Mr Lawless said.

In the meantime, homeowners looking to sell may want to keep an eye on the market, as well as the sale records of similar properties in their area. Be realistic about your sale profit expectations if other sale profits recorded are beginning to dip around you. You may also want to consider options to boost your home’s value, such as renovation projects like upgrading a dated kitchen or adding more storage.

And when possible, it may also be worth considering holding off on selling if the average sale profit in your area is not where you would be comfortable taking a home to auction. Keep in mind that both Labor and Liberal governments have promised incentives to get more buyers in the market post-election win, and overseas migration is set to return to higher levels thanks to eased Covid-19 restrictions, so this could help halt the slowdown of the market. Do your research and consider market factors carefully before you decide to sell.

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