Housing downturn ends record profit run for sellers

The latest property sales data released by Cotality shows that Brisbane remains the most profitable capital for sellers in Australia, despite a national downturn in property prices. In the June quarter, Brisbane properties achieved a median resale profit of $525,000, with 99.8% of sales making a gain. This marks an end to a record run of resales, which had reached 21-year highs in March.

While a softening housing market has pushed down prices, sellers are still benefiting from the significant value growth accumulated over the past five years, providing protection against the early stages of the downturn. However, Melbourne's unit market has seen a much weaker performance, with 20.8% of units sold at a loss and 10% going for less than their purchase price.

Houses overall had a higher resale profit rate of 97.8% compared to 90.5% for units. Nationally, the median profit for sellers was $371,000, with 95.4% of resales returning a profit. Head of research at Cotality, Gerard Burg, noted that profitability remains exceptionally high by historical standards, even as early signs of the downturn begin to affect prices.

He emphasized that the buffer of value growth from the past five years is crucial in safeguarding sellers against the current market conditions. Mr. Burg highlighted the stark contrast between the unit markets in Melbourne and Brisbane, attributing the stronger performance in Brisbane to higher demand. The data also revealed that Adelaide and Perth followed Brisbane as the second and third most profitable capitals, with median gains of $472,000 and $470,000, respectively.

Regional markets, on average, achieved higher profitable resales than the capitals, with 97.5% in regional markets compared to 94.1% in metropolitan areas. However, the downturn has put pressure on more recent buyers, with homes held for shorter periods more likely to be resold at a loss. The median time between purchase and sale of a profitable resale is typically 9.3 years, while it takes an average of 4.4 years for a loss-making property to find a buyer.

Burg cautioned that the current trend of declining values is likely to persist for some time, potentially making profitable sales more challenging due to economic uncertainties and rising pressure on household budgets.