RP Data Pain and Gain Report has lessons for property investment

Lessons for the property investor, RP Data Pain and Gain report The recently released RP Data Pain and Gain report shows some of the keys to gaining a good return on residential property by analysing the sales outcomes from thousands of resales; the sale price is compared with the original purchase price and the profit (or lack of) made by the seller is then calculated and takes into account the time taken to achieve a result..

Sellers and buyers of property also face transactional costs such as taxes that need to be taken into account when this information is applied to a single property.

The most important factor here is the time the property is held. Short-term property ownership – flicking as it is sometimes known – is clearly a high risk strategy.

The  report shows that even in a year where we’ve seen price rises, 12.8 per cent of all owners who purchased and sold in the same year made a loss. Australia-wide, 55.1 per cent of those owned for between 10 and 15 years sold for at least double the original purchase price.

Within Melbourne, the results across Council areas make this clearer. Only 6 per cent of homes resold in the December quarter returned a loss. As an example,this was higher in growth suburbs such as in the City of Whittlesea where 14.2 per cent of resales recorded a loss and the average hold period was a mere 3 years.

In contrast the average hold periods to return a profit were between 8 and 13 years; for instance in the City of Monash 97.3 per cent of resales returned an average profit of $394,250 with an average hold period of 12.9 years.

Another strong point of interest in the report is the importance of timing;the property market is cyclical so those who buy at the peak of the market must ensure they are not selling at the following trough as shown by the fact that homes purchased after January 1st, 2008, had a higher propensity to return a loss.

Robert Larocca
RP Data Victoria Housing Market Specialist

About Robert Larocca

Robert Larocca has built a profile over the past eight years as an expert on the Victorian residential property market. He worked for the REIV both directly and as a consultant over 8 years acting as a spokesperson, managing its research department and public policy. He has been a media and government relations consultant and spent a decade working across the three levels of government including as a Councillor and Mayor in the City of Moreland. He has well developed leadership skills in the not for profit sector and has been the Chairperson of CERES Community Environment Park for 9 years.

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  1. What matters and what doesn’t matter in property investing? - May 24, 2014

    […] Doesn’t Matter: What your friend made or lost flicking a property last year. Does Matter: The fact that many of the people who kept property for under 12 months last year lost money on their deals. […]

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