by Chris Becker
RP Data has just released its latest RP Data Pain & Gain Report for the 1st quarter of 2014, with some very interesting highlights on the Aussie property market.
Here’s a quick smattering:
- almost 65,000 property resales nationally – nearly 10% recorded a gross loss from original purchase price, just under $400 million
- but of the 90% that were profitable, gross profit was over $12 billion! Or roughly $220K profit per property…
- Regional factors weigh, with Wide Bay in QLD having over 31% losses, Sydney the lowest
Another interesting result, where comparisons with the share market are quite valid, is holding time (or, timing your purchase?), and particularly stark if you took part in the “First Home Buyers Bulge”:
The likelihood of making a gross profit or loss is quite different based on the length of time a property has been owned. As a stark example, those homes that were previously purchased prior to January 1st, 2008 (ie pre-GFC) and were subsequently sold during the
March quarter of 2014, only 5.7% of re-sales were made at a gross loss.For those homes that were purchased on or after January 1st, 2008 the propensity to make a loss on the sale climbs substantially. Of those homes that sold over the March 2014 quarter, 16.4% recorded a gross loss relative to the previous purchase price.
Also of note, another 27.2% only made a 0-10% profit since Jan 2008: although its hard to strip those figures down further, that implies about a 2% CAGR (compound annual growth rate).
So nearly half of all property sales since 2008 have been unprofitable, adjusted for inflation (and these are gross results remember, not taking into account interest payable and other fees, nor on the upside do they include rent).
On holding time:
…those re-sales that incurred a gross loss over the March quarter, their average length of ownership was just 5.5 years.
Properties that recorded a gross profit were held for an average of 9.7 years, while those homes that recorded a gross profit of more than 100% of the previous purchase price were owned for an average of 16.2 years.
Of course, it pays to buy any asset during a secular bull market (or bubble), especially property in the 20 years prior to the GFC – that’s why we’re so rich! Rich I tells ya!
Full report here.