One third of homes selling over double purchase price
According to the latest Pain and Gain report released by CoreLogic, approximately one third (31.9%) of homes resold for more than double their previous purchase price.
So, if you thought that property ownership is better for the short term then you need to seriously think again. On average, homes that sold for more than double their previous purchase price were owned for 17.5 years. This reinstates the fact that purchasing a home whether as an owner occupier or as an investor should be seen as a long-term investment rather than a short term quick win.
Throughout the country, homes that resold at a loss, had an average length of ownership of just 6.2 years on average. Across all sales that saw a gross profit, the average length of ownership was 10.2 years.
The Pain and Gain Property Report is a quarterly analysis and measures the profits and losses of sellers by comparing the most recent sale price to the previous sale price and determines where profits were earned and losses were made.
Over the March 2016 quarter, 9.2% of all homes resold saw a gross loss when compared to their previous purchase price. This figure was higher when compared YoY and also at the end of 2015, 8.8% and 8.3% respectively.
For those dwellings which saw a loss, the average loss was $66,073.
Although 9.2% of resales experienced a loss, 90.8% of properties resold over the March 2016 quarter made a profit, with almost one third of homes resold for more than double their previous purchase price generating an average gross profit of $239,855.
Of course, there are some differences between homes sold over the quarter for capital city and regional markets.
For the combined capital cities, homes that sold at a loss over the quarter had only been owned for an average of 5.4 years compared to 10.1 years for homes sold at a gain, whilst homes that sold for more than double their previous purchase price had been owned for an average of 17.2 years.
For the combined regional markets, homes that resold at a loss had only been owned for an average of 6.8 years, compared to the 10.2-year average for homes that sold at a gain. For homes that sold for more than double their previous purchase price, were owned for an average of 18.1 years.
Capital cities have consistently recorded a lower proportion of loss-making resales compared to regional markets since the three months leading to March 2009.
According to CoreLogic research analyst Cameron Kusher, “Property ownership, whether for investment or owner occupier purposes, should be seen as a long-term investment.”
The report also clarifies that capital city housing markets recorded a lower proportion of loss-making resales compared to regional areas.
Mr Kusher said, “The trends in regional areas are shifting with the proportion of loss-making resales trending lower in areas linked to tourism and lifestyle. On the other hand, housing markets linked to the resources sector are generally seeing an elevated level of loss-making resales after housing market conditions in many of these locations have posted a sharp correction.”
It is important that when you purchase a property that you have the end goal in mind. What is it that you want to accomplish by owning a property? For many it is to fuel a better and more comfortable retirement, for others it is to supplement their income allowing them to work part time, or even to take early retirement.
The beauty of long term property investment
However, in order to achieve these goals, you need to invest in property for the longer term and as the data shows, the longer you hold onto a property, the more likely it is to more than double in value. However, to hold onto a property for the long term of at least 10 – 20 years, you need to purchase a property as early as possible. The longer you leave it, the more expensive it becomes to buy a property and the less amount of years you have left to really see your property value grow.
Ideally you should be investing in property in your 20s or 30s giving you more time to grow your capital which in turn allows you to purchase additional investment properties. Today people tend to live in more than one house, so instead of selling your property after a few years, you should in fact be turning it into an investment property and hold on to it for longer to see the greatest potential and returns.
Many purchasers are now investing in a property first and then purchase their dream home at a later date. Whichever way you choose, make sure you think for the long term.
To learn more about property ownership and how you can hold onto properties for the long term, why not get in touch with our Property Consultants at iBuyNew. We are always happy to help. Call us today on 1300 123 463.
Published on 1st of July 2016 by Marty Stanowich