Australia's housing boom hits a wall as prices tip and profits peak

A new snapshot of Australia’s housing market reveals a striking contradiction as sellers walk away with the largest gains in decades, even as the outlook darkens for key markets like Sydney and Melbourne.

According to Cotality’s latest Pain & Gain report, a record 96.0% of property resales delivered a profit in the March quarter, the highest level since 2005. 

The median gain surged to an all-time high of $377,000, while the median loss held at $45,000.

Cotality Head of Research Gerard Burg said those headline figures mask a deeper shift already underway.

“The strong resale results we’re seeing today largely reflect the substantial value growth accumulated over recent years rather than current market conditions,” Mr Burg said.

“Housing values continued to rise through most of 2025, and many sellers have benefited from holding their property through multiple growth cycles, which has allowed them to build significant equity over time.”

A market dividing in real time

While past gains remain strong, forward-looking indicators suggest the market is entering a more fragile and fragmented phase.

Domain’s FY27 Housing Market Forecast predicts house prices in Sydney could fall by as much as $122,000 over the next financial year, the largest decline nationally.

Meanwhile, Melbourne could see drops of up to $84,000, potentially pushing median house prices below $1 million for the first time since 2021.

The downturn is being driven by higher interest rates and reduced borrowing capacity, which has fallen an estimated 7–8% following recent rate hikes.

“The housing market is no longer moving in lockstep,” said Domain Chief Residential Economist Dr Nicola Powell.

“Higher interest rates are weighing heavily on Sydney and Melbourne, while more affordable segments and mid-tier cities are continuing to hold up.”

Winners and losers emerging

The divergence is already visible in resale data.

Brisbane, Adelaide and Perth are leading the nation in profitability, with nearly all resales delivering gains. 

Brisbane topped the list, with 99.8% of properties sold at a profit and a median gain exceeding $525,000.

At the same time, lifestyle markets are delivering some of the biggest windfalls. Noosa recorded the highest median resale gain in the country at $729,750, reflecting sustained demand and limited supply in premium coastal regions.

In contrast, recent buyers in more expensive markets are increasingly exposed. 

Properties sold at a loss had a median hold period of just 4.3 years, often tied to purchases made near the market peak in 2021–2022. By comparison, profit-making resales were typically held for 9.1 years.

“Most people selling for a profit today are benefiting from years of accumulated value growth, but those who purchased closer to the recent peak have had less time to build equity and are more exposed to market fluctuations,” Mr Burg said.

Apartments rise as houses falter

Another shift is taking shape beneath the surface, with affordability reshaping buyer behaviour.

 Houses have historically delivered stronger gains, with a median profit of $440,000 versus $256,000 for units. But that trend may be tested in the coming year. 

Domain forecasts units will outperform houses as buyers gravitate toward more affordable options.

First-home buyers, in particular, are increasingly entering the market via apartments, while some are delaying purchases altogether.

Investor behaviour is also expected to shift as policy changes begin to bite. The federal government has announced that self-managed super funds (SMSFs) will no longer be allowed to borrow funds to purchase residential property, as part of a deal with the Greens to pass budget tax changes through the Senate.

Read more: SMSF home lending scuttled under new rules

The rules are yet to be legislated but would take effect 45 days after assent, potentially removing a source of leveraged demand and reinforcing the shift toward affordability-driven buying.

The end of the easy gains era

Despite record profits today, analysts warn the conditions that drove the boom are unlikely to return anytime soon.

Cotality data shows national home values stalled in May, with declines already underway in Sydney and Melbourne. At the same time, tighter lending conditions and policy changes are expected to constrain demand further.

“The resale results for the March quarter are a reflection of the strong housing conditions experienced across most capital cities over the past five years rather than a forecast of where the market is heading next,” Mr Burg said.

“Declining values will erode profitability in the coming months, but future performance will increasingly depend on local market conditions, property type and when a property was purchased.”

Domain expects the Reserve Bank to hold rates through the rest of 2026, with a potential cut not arriving until mid-2027, a timeline that could prolong the current slowdown.