New report highlights need for investor patience
March 27, 2014 / Written by Rich Harvey
Patience is more than just a virtue when it comes to buying investment property - it's also the path toward sustained profit.
Figures from the latest RP Data Pain and Gain report showed that properties held for a short period of time are much more susceptible to profit loss during a re-sale.
"Despite home values having risen over the past year, 12.8 per cent of owners who purchased and sold in the same year, sold at a gross loss," the report, which covered the December 2013 quarter, stated.
"Keep in mind that the actual number of homes re-sold in less than a year is very small. The greatest proportion of loss making sales has occurred across those homes re-sold after three to five years (19.1 per cent). If an owner wishes to double their initial outlay upon re-sale they generally need to hold the home for at least a decade."
The report went on to show that 55.1 per cent of homes re-sold between 10 and 15 years after their initial purchase brought in double the original price, while 95.1 per cent of those re-sold after 15 years of the initial purchase fetched double the the original price.
How length of ownership affected re-sale price varied in different regions across the country, but the overall trend was clear: Rushed re-sales led to loss.
In Sydney, Melbourne and Canberra, homes re-sold between one and three years after purchase saw the largest proportion of profit loss. Meanwhile, in Brisbane, Adelaide, Hobart and Darwin, the highest proportion of loss was seen in homes re-sold between three and five years after they were initially purchased. Finally, homes re-sold between five and seven years after purchase experienced the greatest likelihood of profit loss in Perth.
The message is clear: Whether you're investing in Sydney luxury homes, prestige apartments or anything in between, having the patience to ride out the property cycles is key to achieving profit growth. In short, once you buy, hold on for the ride.