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Stubbornly high house prices and a supply shortfall have led to record-high profitability and returns for home sellers, CoreLogic research has found.
A slip in home values at the end of last year has caused a slight increase in the proportion of Australians making a loss when reselling their property; however, sellers still generated record average returns, according to new research from property analytics CoreLogic.
CoreLogic’s latest Pain & Gain report, released on Wednesday (19 March), found 94.8 per cent of property sellers made a nominal profit in the quarter ending December 2024, inching down from 95.1 per cent the previous quarter, reflecting a slip in national home values at the end of last year.
Despite this, sellers made a record-high $306,000 median profit although median losses for the quarter rose to $45,000 from $40,000 in the previous quarter.
The median nominal gain of $306,000 also reached a record high since the series started in the mid-90s.
Houses were far less likely to see a loss, with only 3.0 per cent of houses selling for less than the previous price.
Units had a loss-making sales rate of 10.1 per cent in the quarter, up from 9.3 per cent in the previous quarter.
Brisbane claimed the top spot for profit-making resales in Australia, with 99.6 per cent of all resales making a nominal gain.
In contrast, Melbourne was one of two capital cities (alongside Darwin) that had a profit-making sales rate of less than 90 per cent in the December quarter.
Sydney and Melbourne units accounted for almost half the loss-making sales in the quarter (47.2 per cent).
The research also showed that more than a third of loss-making resales in the December quarter had a short hold period of up to four years.
CoreLogic’s head of research Eliza Owen said that this made sense given how many housing markets were yet to recover record-high values reached in early 2022, just before the Reserve Bank of Australia (RBA) began lifting the cash rate target from May of that year.
As of February this year, CoreLogic said that around a third of suburbs were below the April 2022 dwelling value.
Reflecting on the link between property sales and house prices, Owen said: “The slight decline in profit-making resales coincided with a -0.3 per cent drop in national home values.
“This subtle increase in loss-making sales makes sense, because any decline in real estate values increases the chance of loss-making sales occurring.
“Given the strong relationship between capital growth and the rate of profitability and expected further easing in the cash rate this year, the rate of profitability from home resales will likely recover in 2025.”
Housing ‘supply time bomb ticking’
Closely tied to property sales and home values is an undersupply of housing.
Australia faces a looming shortfall of almost half a million homes against the government’s housing target, according to the Mandala Partners report, commissioned by the Property Council of Australia.
The research found that that government is projected to be 462,000 homes behind its target of 1.2 million new homes in well-located areas by 2029.
Overcoming the 462,000 shortfall would moderate price growth by 0.2 per cent on a compound annual basis in the weighted national average house price in well-located areas through to 2029, the same research said.
For instance, if NSW addressed the forecast deficit of 185,000 homes by 2029, house prices in well-located local government areas are forecast to undergo an average compound annual decrease of 1 per cent per year, ultimately adjusting NSW home prices to February 2024 levels.
In Victoria, the compound annual growth rate is expected to decrease by 1.5 per cent but will remain positive at 1 per cent if the shortfall of 71,000 homes is overcome.
Property Council CEO Mike Zorbas said supply shortages would badly affect property prices.
“Missing the target by 462,000 new homes by July 2029 would set off a housing affordability time bomb,” he said.
“Boosting housing supply is the only long-term, sustainable way in which we can boost affordability of homes to buy and to rent.”
Ahead of the federal budget next week and a looming federal election, pressure is growing on politicians to make up a housing shortfall.
The Coalition in February pledged to reform prudential settings, including adjusting serviceability requirements, if it were to gain power.
Last month, the Albanese government announced a two-year ban on foreign investors buying established homes to improve supply.
Two Red Shoes mortgage broker Brett Sutton described the housing market as “on the brink” and said higher supply would remedy unaffordable house prices.
“Every housing policy from recent years – the First Home Buyer Guarantee, Help to Buy, stamp duty reforms – has been designed to ease affordability. But ask any young Australian trying to buy a home, and they’ll tell you these measures haven’t moved the needle,” he said.
“Housing prices continue to outstrip wages, deposits are still unattainable for many, and the cost of borrowing remains high. If the government argues it’s taking action, voters are asking: Why doesn’t it feel like it?”
[Related: Home values could be set for slowdown]
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