Aussie Property: Best profits in 15 years... unless you're selling in Melbourne

If you lost money selling Aussie property recently then this won’t be pleasant reading, because the following data suggests that’s highly improbable. If not almost impossible.

The profitability of flogging your Aussie home has hit an almost 15-year high – and most of those years were pretty bloody good as it stands.

According to property data firm CoreLogic’s head of research – and friend of the show – Eliza Owen, profit-making home resales in this country have clocked their highest rates since way back in the July quarter of 2010.

It’s been a rollicking first quarter of the year, Eliza told Stockhead, largely thanks to the squeeze on home availability outweighing the current economic challenges of higher-for-longer interest rates and the persistently high mortgage repayments they demand.

The upshot has been consistently rising home values, as per CoreLogic’s latest analysis of circa 85,000 dwelling resales throughout the March Quarter.

We read it. And here’s what we found out:

Profit-making home sales in Australia increased to 94.3%
The median nominal gain was $265,000 in the quarter, and the total nominal resale profit was $28.6 billion
The median nominal loss was -$40,000, and the total nominal resale loss was $278 million
Adelaide and Brisbane shared top honours for being the most profitable capital cities with 98.4% of resales achieving a nominal profit respectively in the March quarter
Melbourne became the second-least profitable market of the capital cities behind Darwin
The median nominal gain for houses was 85.5% higher than for units in the March quarter, with 97.1% of house sales in the period resold for a nominal profit
The median hold period of resales across Australia was 8.8 years, down from 9 years in the December quarter

Eliza says the number of transactions increased 8.5% from the same quarter of last year while national home values rose 1.7% in the quarter and that 94.3% of all sales recorded a nominal gain.

Eliza says the weaker median gross profit of $265,000 – down from a revised $268,000 made by those vendors who sold in the final quarter of 2023 – was partly compositional, with a higher portion of unit resales through the start of the year than in the previous quarter.

While the rate of profit-making sales was up, the value of combined profits was down from the December quarter, in part due to the seasonal decline in sales. CoreLogic estimates the combined value of nominal gains from resale was $28.6 billion in the March quarter, down from $30.6 billion in the December quarter of 2023.

Nominal losses from resales were $278 million in the quarter, down from $302 million in the previous quarter.

Capital city profits: best and worst

Outside of the NT, Melbourne had the highest rate of loss-making sales of the capital city markets (at 9.2%, up from 8.9% in the previous quarter).

Adelaide and Brisbane were tied for the most profitable cities, with a loss-making sales rate of just 1.6% of resales.

Fair go, Perth

Still, fair play to the city at the end of the universe, Perth, which you’ve got to say has shown a remarkable turnaround in the past few years as loss-making sales fell to 6.4% from the 43.8% logged back in the June quarter of 2020.

Eliza says that because of Perth’s stonking Q1 metrics – home values up 6.1% in the three months to May, and a median selling time of just 10 days – conditions are parfait for selling property in Perth, with an extra bite of profitability expected for the June quarter.

“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.

“Perth values may have grown rapidly in the past 12 months, up 22.1%, however the median dwelling value is still one of the more affordable cities in the country relative to local incomes,” Eliza adds.

Short-term resales have peaked

Short-term resales have become a handy indicator of how households respond to rising rates, according to Eliza.

The latest figures suggest the short-term selling for properties owned for two years or less has passed a peak, as the value of housing lending on fixed terms had also passed a peak by March 2022.

“As housing values have risen, the rate of loss-making sales within short-held properties has also declined.

“Interestingly, though, properties held for two-to-four years have made up a relatively high portion of resales in the March quarter at 15.3%, which may be influenced in part by the expiry of three-year fixed terms.”

Regional market performance

The rate of profit-making sales in Q1 was higher in the combined regions than in capital city markets, Eliza says, which has been the case each quarter since the three months to May 2020.

Of the resales in regional Australia through the March quarter, 95.6% made a nominal gain, compared to 93.5% of resales in the capital city markets.

“The rate of loss-making sales in regional Australia has structurally shifted lower from a pre-COVID decade average of 13.0% to 7.2% since March 2020.

“This shift is driven by increased demand in lifestyle regional markets, the affordability of major regional centres compared to capital cities, and a recovery in resource-based regional markets.”

Houses vs Units

Across all of Aussie, houses continued to deliver more profit-making sales than units. No brainer.

The latest numbers show 97.1% of house resales made a nominal gain in the March quarter, compared to 89.0% of units.

Eliza says the gap between house and unit profits had roughly tripled in the past four years with nominal gains from houses sitting 85.5% higher than units in the March quarter of 2024.

The median nominal gain for houses in the March quarter was $320,000, compared to a median nominal gain for units of $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.

“Underlying land value, scarcity, and a desire for more space through the pandemic has helped drive buyer demand and in turn led to a more substantial rise in house values relative to unit values.

“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.”

Hold period trends

The median hold period of resales across Australia was 8.8 years through the March quarter, down from 9.0 years in the December quarter of 2023, and 8.9 years in the March quarter of 2023.

Eliza says median hold periods have generally moved lower during home value upswings, as more profit-making resales of properties held for shorter periods increases.

The latest data shows that the median hold period for resales places the median initial purchase date in May 2015, during which time national home values increased by approximately 58.2% through the end of March 2024.

“Most markets have seen a sizeable lift in home values in the past eight years, however it may surprise people to know there are still markets where values have softened through this period. This includes Darwin and the rest of the Northern Territory.

“Time in the market rather than timing the market is critical to maximising returns for most resales. Generally, the longer a vendor holds a property the higher the returns with vendors selling after 30 or more years attracting the largest median gain of $780,000.”