Housing downturn ends record profit run for sellers

Brisbane is still the country's most profitable capital for sellers despite the housing downturn, while one in five Melbourne units recorded a loss, according to the latest figures from data property firm Cotality.

The June quarter data marks an end of record resales, from their 21-year high in March.

Brisbane resales had a median $525,000 profit, with 99.8 per cent of sales in the quarter making a gain.

Meanwhile in Melbourne, 20.8 per cent of units were sold at a loss, and about one in 10 Sydney units went for less than their purchase price.

Houses returned a profit more reliably than units overall, with 97.8 per cent of houses making a gain compared to 90.5 per cent of units.

Nationally, sellers made a median $371,000, with 95.4 per cent of the more than 94,000 resales analysed returning a profit.

Head of research at Cotality Gerard Burg said profitability was still "exceptionally high by historical standards" even as a softening housing market pushed down prices.

"Most sellers are still benefiting from the significant value growth accumulated over the past five years, which is providing considerable protection against the early stages of the downturn," he said.

"With home values falling across more markets, that buffer will become increasingly important in determining resale outcomes."

Mr Burg said there was a "real contrast" in the unit markets, with a "much weaker performance" in Melbourne, where CBD unit values peaked in 2017.

"So, it's very hard to get a profitable resale in that type of environment," he said. "In contrast, there's been a lot of demand for units in Brisbane." 

'Normalising of the market'

Brisbane real estate agent Brett Andreassen said the data confirmed what he had been seeing for months — prices have come down.

"It is probably more of a normalising of the market because the last few years were anything but,"

he said.

"I think because this crazy growth happened over five years, everyone thought that was the normal — when it really wasn't."

Mr Andreassen said sellers whose property had been on the market for months "have still got those previous figures in their heads".

"Whereas a lot of the owners that are coming on the market now have adjusted their expectations to the current reality," he said.

Adelaide was the country's second most profitable capital, followed by Perth with a $472,000 and $470,000 median gain respectively.

Home prices in each city had jumped since COVID-19, when relative affordability had boosted interstate migration, Mr Burg said.

Regions make more gains

Meanwhile, regional markets had higher profitable resales than the capitals, with 97.5 per cent compared to 94.1 per cent.

Metro sellers still made a bigger gain, with a $415,000 median compared to $324,500.

Mr Burg said the downturn put more recent buyers at risk, with homes held for less time more likely to be resold at a loss.

Nationally, the median time between purchase and sale of a house for a profitable resale was typically 9.3 years.

The median time off the market for a loss-making house was 4.4 years.

"The longer that you hold the property, the less exposed you are to the fluctuations that occur in an individual housing cycle," he said.

Mr Burg said the current trend of declining values was likely to "persist for some time", which could to a profitable sale becoming "more challenging".

"There is significant uncertainty around the short-term economic outlook, particularly the direction of interest rates and increasing pressure on household budgets," he said.

"If housing values continue to fall, we would expect that to place further downward pressure on resale profitability over the coming quarters."