House Profits Hit Decade High

Australia’s house and unit profit sale prices have hit 16 and 13-year highs, respectively, underpinning the strength of the residential sector as a ‘wealth-building avenue’.

According to Domain’s Profit and Loss Report, 96 per cent of houses and almost 91 per cent of units were resold for a profit last financial year, with regional Australia leading the way.

For the first time, a higher proportion of home owners in the regions sold their properties for a profit compared to their counterparts in cities.

The proportion of units in regional areas selling at a profit also stood at higher level (close to 95 per cent) compared to just 89 per cent in the cities.

“The lower upfront costs of regional buying combined with greater pricing resilience during the recent downturn, attractiveness, likely longer holding times, and less investor exposure are leading the regional profitability transition,” the report said.

Domain research and economics chief Nicola Powell said it was “unsurprising” that profit-making sales were on the rise, given Australia’s record pricing and the likelihood of further price increases.

“This trend is more pronounced for houses than for units and various factors contribute to these differences, including housing preferences, development cycles, and tenure, as units are typically held for shorter periods,” she said.

The median profit remained substantial but varied across cities and regions.

Sydney, Canberra and Melbourne were the most expensive cities in terms of profits for houses, with figures standing at $655,000, $435,000 and $397,000, respectively.

Brisbane was the top performer among cities, with nearly all houses and 96 per cent of units being sold at a profit.

“Regardless of how long a property has been held, the city’s sustained price growth over the past year, five years, and decade have consistently delivered gains,” the report said.

While Brisbane was followed by Perth and Adelaide, which reached multi-year highs, weaker property and market conditions caused the smaller capitals of Canberra, Hobart, and Darwin to experience a decline in profit-making sales over the past year.

Additionally, loss-making sales were more widespread for units compared to houses, due to shorter ownership periods, higher levels of investment activity, varying quality of developments, and the cyclical nature of the development cycle.

Melbourne recorded the smallest loss in value, with a median loss of 5.7 per cent or $50,000, while Darwin experienced the largest unit loss at 18.6 per cent or $83,000.

As for units, the outcome was mixed: Brisbane and Adelaide led in unit profit gains (in percentage and dollar terms) while units in Sydney and Melbourne saw profit margins narrow over the past year and five years.

Darwin experienced the largest unit loss (at 18.6 per cent or $83,000), with Hobart, Adelaide, and the combined regional areas also facing larger losses, as units and regional markets typically saw more volatility. 

Interestingly, Generation X and older Millennials, in their late 30s and 40s, stood to benefit from the recent price boom, according to the report.

This age group dominated the top three suburbs with leading profit gains for both houses and units across major cities.

According to the report, this is “very telling of the buyer profiles associated and their positions on the property ladder” and demonstrates that these home owners were ‘well-established in their property journeys, with properties most likely purchased before 2020.

“This challenges the common narrative that Baby Boomers lead profit gain in the current market. While Boomers have certainly reaped significant rewards from decades of rising home prices, it is their children who are walking away with the most profit in today’s market.”