Sell Home in Australia

In the first quarter of the year, the Australian property market experienced a surprising strength, with the median profit made on a home sale reaching $265,000, according to CoreLogic’s Pain & Gain, March Quarter 2024 report. This marked the highest rate of profitability since July 2010. However, economists believe that the fundamental factor behind this strength is the overwhelming demand that continues to outpace supply in the property market.

Demand Continues to Outweigh Supply

Despite the slightly smaller capital gain in the March quarter, more property owners are making a profit on the sale of their homes. The rate of sellers making a profit has improved over the year and is the highest since July 2010. This increase in profitability helps to enhance financial stability for many property owners, especially as higher mortgage costs start to impact household budgets. Economists predict that the Reserve Bank will closely monitor the number of shorter-term property resales for signs of mortgage stress.

Mixed Picture Across the Country

While the property market remains strong overall, there are variations in performance across different regions. Melbourne had the highest rate of loss-making sales among capital city markets at 9.2%, up from 8.9% in the previous quarter. On the other hand, Adelaide and Brisbane had the most profitable cities, with a loss-making sales rate of just 1.6% of resales. Perth has shown a remarkable turnaround in recent years, with loss-making sales declining to 6.4% from 43.8% in the June quarter of 2020. The conditions in Perth heavily favor sellers, and further improvement in profitability is anticipated in the coming months.

Houses vs. Units

Houses continue to deliver higher rates of profit-making sales compared to units. In the March quarter, 97.1% of house resales made a nominal gain, while only 89.0% of unit resales recorded the same. This indicates that houses are generally a more lucrative investment option in the Australian property market.

Three-Year Resales at a High

One notable trend is the increased number of sales after holding a property for three years. This suggests that higher mortgage rates may have influenced some highly leveraged borrowers to sell their properties sooner than they would have otherwise. However, the peak of the short-term resales series is not significantly higher than the historic decade averages. The portion of properties sold after two years peaked at 8.4% of resales in August 2023, slightly higher than the decade average of 6.7%. Similarly, three-year held resales in the year to March reached a high of 15.8%, which is not far from the decade average of 12.7%.

The Median Hold Period

The median hold period for resales across Australia was 8.8 years in the March quarter, slightly lower than the December quarter of 2023 and the March quarter of 2023. This means that Australian homeowners typically stay in their homes for around 8 to 9 years. It is generally believed that the longer a vendor holds a property, the higher the returns. Vendors who sell after 30 or more years tend to attract the largest median gain, amounting to $780,000.

Conclusion

The Australian property market has shown surprising strength in the first quarter of 2024, with a median profit of $265,000 on home sales. Demand continues to outpace supply, driving the profitability of property resales. While there are variations in performance across different regions, houses generally deliver higher rates of profit-making sales compared to units. The increase in three-year resales suggests that higher mortgage rates may have influenced some highly leveraged borrowers to sell their properties sooner. Overall, the Australian property market remains strong, with a median hold period of 8.8 years for resales.