Profit Making Dominates Despite Easing

While price growth may have eased in recent months, new analysis shows the vast majority of sellers are still achieving a nominal profit.

Cotality’s latest Pain and Gain Report shows that 95.4% of sales during the June quarter achieved a profit compared with 96.1% in the previous quarter.

Brisbane remains in top spot in terms of profit-making sales with 99.8% of sales at a profit, followed by Adelaide (98.9%), Perth (98.8%), Hobart (97.6%) and Sydney (92.7%).

Melbourne’s level of profitability is the lowest of Australia’s capital cities at 89%.

Nationally the median profit for sellers was $371,000 for sales during the quarter, with Brisbane the highest profit of $525,000.

Regional Australia outperformed capital city Australian in terms of profits in the quarter and house markets outperformed unit markets.

Cotality Head of Research Gerard Burg says the results show just how much equity owners have built over the past five years.

The median hold time for a profit-making resale is 9.1 years nationally, compared with 8.1 years for a loss-making sale.

“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,” Burg says.

“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.”

Despite the slight easing in the past quarter Burg says 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,” he says.