Houses hold profit lead with downturn set to lower gains

The national median profit also slipped from a record $378,000 to $371,000, while the median loss edged higher from $44,000 to $45,000.

Houses widen their advantage

The report found that houses continue to produce stronger resale outcomes.

Some 97.8 per cent of house resales made a nominal profit in the June quarter, down slightly from 98.2 per cent in March. The median gain on a house resale eased to $435,500, from $443,000 in the previous quarter.

By comparison, 90.5 per cent of unit resales delivered a profit, with a median gain of $251,000.

Cotality attributed part of that divide to the widening price differential between the two dwelling types.

The median house was priced 36.5 per cent above the median unit nationally in the June quarter.

While slightly below the quarterly record premium of 36.8 per cent in March, the gap was far wider than the 21.2 per cent recorded in June 2021.

Nationally, the June resale data showed 97.8 per cent of houses sold at a profit, compared with 90.5 per cent of units.

Units nevertheless accounted for a disproportionate share of the market’s pain, representing 63 per cent of national resale losses by dollar value and 74 per cent of loss-making resales across the capital cities.

Losses cluster in key markets

While loss-making house resales were spread across a broader range of locations, Melbourne accounted for 27.5 per cent of the total value of housing losses.

The concentration was sharper for units, with Melbourne and Sydney together accounting for 83.3 per cent of the national value of unit resale losses in the June quarter.

Almost 39 per cent of all unit losses by value were recorded in just five local government areas: Melbourne, Parramatta, Stonnington, Port Phillip, and Sydney.

In Melbourne, 20.8 per cent of unit resales were loss-making during the quarter, while approximately one in 10 Sydney unit sales were below their prior purchase price.

Time builds an equity buffer

Holding time remained a major dividing line between profitable and loss-making resales.

Properties sold at a gain had been held for a median of 9.1 years nationally, compared with 8.1 years for loss-making resales.

The gap was especially pronounced among houses, with profitable house sales having typically been held for 9.3 years, compared with only 4.4 years for houses sold at a loss.

Cotality head of research Gerard Burg said the extended ownership period had allowed many vendors to build resilience through more than one phase of price appreciation.

“Owners who have held their property for nine or 10 years have generally experienced several periods of value growth, giving them a much larger equity buffer when market conditions weaken,” he said.

“Recent buyers have had much less time to accumulate those gains and are therefore more exposed when values fall, particularly if they bought close to a market peak.”

The typical 4.4-year hold period for loss-making house resales places many of those purchases around 2022, when values were close to their previous peak.

Yet Burg cautioned that time alone did not ensure a positive result, but said it improved the odds.

“However, longer ownership doesn’t always guarantee a profit, and the results vary considerably by market and property type, but the likelihood of a profitable resale generally increases with time,” he said.

Downturn could deepen losses

The June-quarter data arrives against a weakening housing-market backdrop.

Cotality’s Home Value Index fell 0.4 per cent in June, following consecutive monthly declines, while rate increases have intensified mortgage-serviceability constraints.

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

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

[Related: WA resale gains outpace nation]