Australia’s housing market is starting to look different after several years of strong price growth.
The share of profitable property resales fell to 95.4% in the June quarter, down from a 21-year high of 96.1% in March, Cotality’s latest Pain & Gain report shows. The median gain also fell from $378,000 to $371,000.
The numbers point to a tougher market for sellers, but most homeowners are still walking away with substantial gains. And despite the softer conditions, there is little sign of a rush to sell.
Resale profits are starting to feel the downturn
More than 95% of residential resales in the June quarter delivered a nominal profit, meaning they sold for more than what was originally paid, the report showed.
That’s still a high rate of profitability, but the decline marks a shift after several years of strong housing growth.
The median gain fell to $371,000, while the median loss increased from $44,000 to $45,000.
Brisbane remained the most profitable capital city in the June quarter, with 99.8% of resales delivering a gain and a median profit of $525,000.
Melbourne was at the other end of the spectrum, with 89% of resales profitable and a median gain of $278,000.
“Profitability is still exceptionally high by historical standards, but we are starting to see the impact of weaker housing market conditions flow through to resale outcomes,” Cotality Head of Research Gerard Burg said.
“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.”
That buffer could become increasingly important if the downturn continues.
Most owners still have room to wait
One of the clearest findings in the report is the relationship between how long a property has been held and whether it sells for a profit.
Profitable resales had a median hold period of 9.1 years in the June quarter, with houses that made gains typically being held for 9.3 years.
This helps explain why falling property values don’t necessarily translate into a rush of properties hitting the market.
Owners who have held their property for close to a decade have generally had more time to build up equity and absorb short-term changes in value. Unless they have an immediate reason to sell, they may have more flexibility around when they put their property on the market.
No rush of new listings
The latest listings data paints a mixed picture.
SQM Research recorded a 1.6% increase in new listings across Australia in August, while total listings fell by 3.3% over the month. Notably, some areas are carrying more stock, while others have seen listings fall.
Neither figure points to a major shift in the number of properties coming onto the market.
New listings have edged higher, but not by enough to suggest homeowners are rushing to sell. At the same time, the decline in total listings indicates the overall pool of properties available for sale has not continued to build over the month.
While buyers are facing a softer market, there’s no evidence yet of a corresponding surge in supply which happens when more homeowners try to sell.
A market in transition
The latest data points to a housing market that’s cooling, but not triggering a rush of sellers.
Resale profits have started to retreat, but 95.4% of resales are still profitable and most long-term owners have built up significant equity. That gives many homeowners some protection against falling values, while recent buyers with less equity are more exposed to the downturn.
For now, the market doesn’t appear to be seeing a wave of properties come to market. How long that continues will depend on what happens to property values, interest rates and household finances in the months ahead.
Disclaimer: The information enclosed has been sourced from Cotality and SQM Research and is provided for general information only. It should not be taken as constituting professional advice.
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