Australian property resales hit their highest profitability rate since July 2010 in Q1 2024, driven by rising home values despite economic challenges and high mortgage rates. CoreLogic’s Q1 2024 Pain & Gain report, which analyzed around 85,000 resales, found that 94.3% of transactions recorded a nominal gain.
Eliza Owen (pictured above), CoreLogic’s head of research, reported an 8.5% increase in transactions from the same quarter last year and a 1.7% rise in national home values. The median gross profit decreased slightly to $265,000 from $268,000 in the previous quarter, attributed to more unit resales.
“Despite the slight drop off in the median nominal gain, the rate of sellers making a profit has improved over the year and is the highest in Australian dwelling sales since July 2010,” Owen said. “This increase in the profitability rate across the Australian housing market helps to shore up financial stability for many property owners at a time when higher mortgage costs are starting to take their toll on household budgets.”
While the profit-making rate rose, combined profit value fell to $28.6 billion from $30.6 billion in Q4 2023, partly due to seasonal sales declines. Nominal losses from resales dropped to $278 million from $302 million in the previous quarter.
Melbourne had the highest rate of loss-making sales among capital cities at 9.2%, up from 8.9% in Q4 2023. Adelaide and Brisbane were the most profitable, with only 1.6% of resales making a loss. Owen highlighted Perth’s turnaround, with loss-making sales down to 6.4% from 43.8% in June 2020.
Owen noted Perth’s strong metrics, including a 6.1% rise in home values and a median selling time of 10 days, suggest continued improvement in profitability. “In the December quarter of last year, Perth managed to improve its position from the second least-profitable capital city for the first time since 2015. The rate of loss-making sales has continued to shrink, and it’s overtaken Sydney and Melbourne,” she said.
Profit-making sales were higher in regional markets than in capital cities, continuing a trend since May 2020. In Q1 2024, 95.6% of resales in regional Australia made a nominal gain, compared to 93.5% in capital cities. Owen attributed this to increased demand in lifestyle regional markets and the affordability of major regional centers.
Houses continued to deliver higher profit rates compared to units. The report shows 97.1% of house resales made a nominal gain in Q1 2024, compared to 89.0% of units. The median nominal gain for houses was $320,000, while for units, it was $172,500.
“The enormous capital gain windfalls afforded to detached house owners over the past few years is another illustration of the ‘haves’ and ‘have nots’ of real estate,” Owen said. “But affordability and supply constraints are kicking in and as a result units are becoming increasingly attractive to those who have been priced out of certain markets. Slowly that gap between the price of detached housing and medium to high density options should decrease and with that profitability of units will improve.”
The median hold period for resales was 8.8 years in Q1 2024, down from nine years in the previous quarter. Owen noted that hold periods generally shorten during home value upswings, as more profit-making resales of properties held for shorter periods increase. “Time in the market rather than timing the market is critical to maximizing returns,” Owen said.
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