Australian property values have been soaring to unprecedented levels, yet a subtle “first crack in profitability” might foreshadow a cooling market.
Recent figures from Domain, published on Wednesday, reveal that in the first half of 2026, 97.4 percent of home resales were profitable, a slight dip from the 97.5 percent recorded a year earlier.
Although this minor drop of 0.1 percent seems insignificant, it could suggest the beginning of the end for the long streak of robust resale profits.
Despite this, the majority of sellers are expected to continue enjoying “substantial gains,” as noted by Domain’s chief residential economist Nicola Powell in an interview with SBS News.
Nonetheless, this marginal decline in nationwide profitability might be an indication of a decelerating property market, potentially leading to a drop in home prices in the foreseeable future.
“While that shift is small, I think it is significant because what it’s telling us is that resale profitability is a lagging indicator and tends to follow changes in home pricing,” she explained.
“We’ve got some of our capital cities now going backward in price and particularly in some of our markets, we are seeing an increase in loss-making resales.”
REA Group Senior Economic Analyst Megan Lieu said realestate.com.au data also revealed a drop in profitability.
In the past six months to July, 94.4 per cent of home resales made a profit, down from 94.9 per cent in the previous six months to January, she said.
But while properties are seeing larger average losses as profitability declines, some markets are soaring.
Where are people making and losing money on property?
While slightly fewer properties are making a profit compared to 12 months ago, successful sellers are still enjoying record returns.
Median resale profits climbed to record levels of $458,000 for houses and $237,000 for units nationally.
In the capital cities, median house profits were even higher at $552,000.
Sydney posted the country’s largest resale returns, with the median house vendor achieving a profit of $739,500.
Meanwhile, Brisbane, Perth and Adelaide are increasingly standing out as the strongest markets for seller returns, with almost every resale delivering a gain.
Perth recorded the greatest proportion of profitable house resales, with 99.6 per cent of sellers making a profit on their transaction. Brisbane led the unit market, where 99.5 per cent of resales generated a positive return.
In contrast, Melbourne remained the weakest capital city market for units. More than one in four sellers sold for less than their original purchase price, while Melbourne also recorded one of the highest shares of loss-making house resales, alongside Canberra.
Surprisingly, some areas saw both record profitability gains and losses over the year.
Powell explained that record-high losses come from a small pool of sales.
“Those losses are perhaps large because they’re in financial strife,” she said.
“Or perhaps they’ve maybe leveraged themselves too much; they’ve stretched themselves too much to keep up with voracious price gains.”
Home values and sale volumes fall
As overall profitability has fallen, home values and the number of properties sold have declined, according to Cotality.
In its latest report released on Monday, the group found that home values had fallen by 0.7 per cent in July and fewer people had listed their properties.
Cotality Head of Research Gerard Burg said that nationally, total home listings sat 1.1 per cent below the five-year average over the four weeks ending 26 July.
“There remains a mismatch between the pricing expectations of buyers and sellers,” Burg said in the report.
“Capital city auction clearance rates have remained below 50 per cent since late May, although they have moved up from the low 40s range in mid-to-late June.”
Lieu said that higher interest rates and tax changes from the federal budget are also contributing to a market slowdown.
“We expect prices to fall further in 2026, however, the extent of the decline will depend on the trajectory of interest rates and supply,” she said.
A growing divide
Looking at property markets across Australia shows a “growing divide” in prices that Powell expects will continue.
On the one hand, the largest property markets — Melbourne and Sydney — are seeing prices weaken, while smaller markets in Perth, Adelaide and Brisbane continue to soar.
“Both Melbourne and Sydney are seeing an uplift in housing supply, so that increase in housing stock is giving buyers more choice,” Powell explained.
While those capitals could continue to fall in price, it could be some time before other cities hit a price ceiling.
Powell said these shifts in profits and losses are normal in the property market.
“Making money off of property is about being in it for the long game,” she said.
“Staying put increases your chances of actually making a healthy profit upon reselling that home, because you’re riding the waves and the turns that make up the property price cycle.”