The latest analysis report (Q2 2024) examined over 91,000 resales during the quarter, indicating that 94.5% of deals generated a nominal gain, one of the highest percentages since June 2010. The nominal gains from resales reached $31.8 billion in the June quarter, up 7.7% from the March quarter.
National housing values have increased every month since November of last year, resulting in a record median gain.
As with growth trends across Australia, the narrative is one of volatility, with Brisbane topping the list as Australia’s most profitable market, with a profit-making sales rate of 99.1%. This was followed by Perth (95.4%) and Adelaide (98.7%). Darwin and Hobart saw the greatest quarterly increase in the rate of loss-making sales among the capitals, while Melbourne and Sydney were the second and third least profitable cities after Darwin.
The profitability across Brisbane, Adelaide, and Perth reflects strong capital growth trends in recent years, which is also contributing to lower hold periods for profit-making sales.
Profitable sales are likely to rise further in the September quarter, coinciding with growing home values.
However, the housing market faces certain demand headwinds in the shape of ‘higher-for-longer’ interest rates, a high cost of living, and limited affordability.
Combined with what is looking like a robust spring selling season, the depth of buyer demand to deliver higher and higher profits may be tested in the coming months.
In contrast, the median resale loss in Australia was $40,000, with a median proportionate loss of -6.8%, totaling $282 million, up 2.5% from $275 million in the March quarter..
However, that number was far behind the highest cumulative loss from resales, which totaled $531 million in the three months ending November 2020.
Units accounted for the majority of resale losses across Australia, accounting for 66.3% of the total. Notably, 70.6% of these properties were located in Sydney and Melbourne. In fact, loss unit resales in these two cities represented nearly half of all business losses in the quarter, totaling 46.8%..
Even in cases of loss-making resales characterised by short holding periods and minimal time to reduce mortgage debt, a resale loss of -6.8% is considered relatively minor, indicating a low risk of default.
Houses are more profitable than units
Houses remained more profitable than units in the June quarter, with a nationwide profit-making sales rate of 97.2% vs. 89.4% in the unit segment.
The rate of loss-making sales in the house category was only 2.8% nationally, compared to 10.6% in the unit sector.
Not only were units around four times more likely to make a loss from resale than houses, but the median nominal gain from house resales was almost twice as large as that of units,” coming in at $340,000 and $185,000, respectively.
Interestingly, homes and apartments saw the highest nominal returns from name resale.
The outlook for high unit owners appears to be encouraging, with unit profits predicted to rise in the near future. Demand for housing could pick up in the coming months as buyers move away from relatively expensive independent properties.
Key findings for Pain & Gain, June Quarter 2024
- In the second quarter of 2024, we saw more than 91,000 homes sold.
- Nationwide, the percentage of profitable sales increased to 94.5%. For the quarter, nominal profits were $285,000 and total nominal profits on resale were $31.8 billion.
- The total nominal selling loss was $282 million, with a median loss of -$40,000. Brisbane was the most profitable city for the quarter, with 99.1% of sold properties generating a little profit.
- Darwin and Hobart experienced the highest quarterly rises in the percentage of sales that ended in a loss.
- Houses remained significantly more profitable than units in the June quarter, with a nationwide profit-making sales rate of 97.2%, compared to 89.4% for units.
- The average duration of custody for resales across Australia. was 8.8 years, which is steady for the March quarter.
