Australia housing downturn deepens as Cotality reveals 95 per cent of home sellers still make a profit

Australia is undergoing one of the steepest housing downturns in decades, but years of strong growth mean most homes are still being sold for a hefty profit.

In the June quarter, 95.4 per cent of dwelling sales made a gain, down from the 21-year high of 96.1 per cent share recorded in the three months to March, research from data provider Cotality showed on Wednesday.

While national dwelling values declined 1.5 per cent over the June quarter, prices were still more than 67 per cent higher than six years earlier.

Several years of very strong growth had left many homeowners with a substantial equity buffer, helping vendors rake in a combined $35.9 billion in profit in the quarter, Cotality head of research Gerard Burg said.

“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,” Mr Burg said.

“Most sellers are still benefiting from the significant value growth accumulated over the past five years, which is providing considerable protection against the early stages of the downturn.

“With home values falling across more markets, that buffer will become increasingly important in determining resale outcomes.”

Australia’s housing downturn continued to deepen in July and August, as the outlook for interest rates worsened and investors continued to count the cost of the federal government’s changes to negative gearing and the capital gains discount.

Nationwide prices are only down 3.6 per cent from their March peak, but several economists, including at HSBC and Morgan Stanley, expect the total fall in values to hit 10 per cent or more, which would be the deepest downturn in more than 40 years.

The pace of the decline has also rattled sentiment, with the 2022/23 downturn the only time prices have fallen faster for longer since the 1980s.

Buyers who held onto their property for a longer period of time were better able to ride out the cyclical ebbs and flows.

“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,” Mr Burg said.

Houses that sold for a profit were held for a median 9.3 years, compared with the typical holding time of 4.4 years for loss-making house resales.

Overall, 97.8 per cent of houses were sold for a profit, underscoring the growth advantage of freestanding homes over units. Only 90.5 per cent of unit sales made a profit.

Sydney was still the top money spinner in dollar terms, with a total profit of $6.6 billion.

But the proportion of sales that made a profit eased to 92.7 per cent, well below Brisbane which recorded a profit in 99.8 per cent of sales.

Nationally, the median gain eased from a record $378,000 to $371,000, while the median loss increased from $44,000 to $45,000.