More pain than gain for short-term buyers

by AB09 Oct 2013

RP Data’s latest Pain and Gain national report shows timing is everything when it comes to buying property in Australia, with figures for the June quarter varying widely from region to region and between property types.

According to the report, there were 69,390 residential property re-sales over the quarter and, of these, 12% (with a majority located in ‘lifestyle regions’), recorded a gross loss based on their original purchase price and amounted to losses of $530.7m. On the up side, the remaining 88% of all June quarter re-sales made a gross profit, which amounted to $12.1b.

RP Data research analyst, Cameron Kusher, says the largest proportion of the losses were found in lifestyle markets like Queensland's Gold Coast, with units suffering the greatest losses (35.3% of all June quarter re-sales transacted at a price lower than what the home was purchased for).

Regional areas around resource-driven nodes and agricultural areas showed the strongest re-sale conditions, with Queensland's Central West, Victoria's Barwon and Central Highlands regions and Perth all recording fewer than 6% of June quarter transaction losses.

Kusher says the likelihood of making a gross profit or loss is heavily based on the length of time a property has been owned.

"As a stark example, homes that were purchased prior to January 1, 2007 (pre-GFC) and were then sold during the June quarter of this particular year, only 7.2% of re-sales made at a gross loss. However, for homes purchased on or after this date, the propensity to make a loss on the sale climbed substantially,” says Kusher.

"If you look at those properties which sold at a loss over the quarter they had an average hold period of just five years. This highlights the long-term nature of investment in residential property and that if you chase short-term profits you are likely to be more susceptible to losses.”

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