Australia's property market is exhibiting starkly different trends, with some regions experiencing a significant downturn and others defying it. New figures indicate that nearly half of all homes sold in Melbourne's central business district (CBD) in the June quarter were sold at a loss. Similarly, Parramatta in Sydney recorded a 23% loss-making rate for resales during the same period, positioning them among the country's weakest performing property markets.
Apartment owners in these major cities bore the brunt of the losses, with nearly 40% of the total value of unit resale losses across Australia concentrated in just five local government areas: Melbourne CBD, Parramatta, Stonnington, Port Phillip, and Sydney CBD.
Gerard Burg, Head of Research at Cotality, noted that while profitability remains historically high, the ongoing housing downturn is beginning to impact resale profits, particularly for those who purchased more recently. "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," Burg stated. "With home values falling across more markets, that buffer will become increasingly important in determining resale outcomes."
Burg highlighted that buyers are facing mounting financial pressures from multiple fronts, including affordability constraints, mortgage serviceability concerns, recent interest rate increases, higher cost-of-living pressures, weaker consumer sentiment, and changes affecting property investors. He warned that further declines in home values could force more sellers to accept losses. "There is significant uncertainty around the short-term economic outlook, particularly the direction of interest rates and increasing pressure on household budgets," he added.
Shane Oliver, AMP chief economist, suggested that the Reserve Bank is likely to increase interest rates at its upcoming meeting but indicated a second hike in November might be excessive, potentially pushing mortgage holders to their financial limits and risking a property market crash, higher unemployment, and a deep recession. Market expectations of nearly three hikes by October next year appear to be an overreaction to surging oil prices, he noted.
In contrast to the downturn in Melbourne and Sydney, sellers in Western Australia have continued to profit from the state's housing boom. Three local government areas in Western Australia dominated the nation's most profitable resale markets. Chittering, northeast of Perth, topped the list with a median nominal gain of $872,500 in the June quarter, following dwelling value increases of over 180% from pre-pandemic lows. Cambridge in Perth's inner west and Joondalup in the city's north followed, with median gains of $740,000 and $732,500, respectively.
Houses generally outperformed units in terms of resale returns, with house sellers achieving a median gain of $435,500 compared to $251,000 for unit owners. Buyer's agent Glenn Price observed that some vendors still hold inflated expectations of their property's value, remaining "stuck in 2023 mode." He emphasized that a property's worth is determined by what a buyer is willing to pay in the current market. Price also advised vendors that in a downturn, a strategy of selling lower to buy lower can help recoup losses on the subsequent purchase.
Brisbane maintained its status as Australia's most profitable capital city in the June quarter, with 99.8% of resales yielding a profit and a median gain of $525,000. Adelaide ranked second in overall profitability at 98.9%, with its median gain reaching a record $480,400. Perth followed with 98.8% of resales recording a profit and a median gain of $470,000. Melbourne recorded the lowest share of profitable resales among the capitals, at 89%.