The conventional belief that holding property long-term guarantees financial success is being challenged by recent data. CoreLogic’s analysis shows that the difference in hold periods between profitable and loss-making property sales is minimal. In the June 2024 quarter, the median hold period for profitable property sales was 8.9 years, while those making a loss held for 8.0 years on average. For units, the difference is even smaller, with profitable sales at 8.7 years and losses at 8.5 years.
Factors Influencing Profitability
- Property Quality: Properties of lower quality, particularly those built for investors in high-density areas, have been harder to sell for a profit.
- Owner-Occupier vs. Investor: Investors may be more likely to sell at a loss if they can offset those losses against future capital gains, while owner-occupiers often face higher risks.
- Market Cycles: Short-term gains can happen in periods of rapid market growth, but such timing is difficult to predict. For instance, those who bought at the pandemic’s lowest point and sold in 2024 saw significant returns.
- Location: Market conditions vary by region. Areas like Perth and Darwin have struggled to recover after resource-driven economic downturns, while cities like Adelaide, Brisbane, and Melbourne have seen dynamic changes in affordability and growth patterns.
Housing Affordability and Deposit Struggles
Affordability has become a major hurdle for home buyers, particularly in cities like Sydney. Data shows that $100,000 in savings is insufficient for a 20% deposit in most Sydney suburbs, with buyers needing at least $150,000 for a house deposit. Many buyers are turning to extreme measures—working overtime, cutting back on essentials, and even relying on financial help from family—to save for a deposit. Lender Mortgage Insurance (LMI) has also become a popular option for those with smaller deposits.
Future Trends and Market Shifts
A shift is expected in the Australian property market, driven by increased housing supply and Baby Boomers downsizing, which will significantly impact market dynamics. Coastal towns are likely to experience price growth as both Baby Boomers and millennials, enabled by flexible work arrangements, pursue lifestyle changes and more affordable locations.
Conclusion
While long-term property investment has often been seen as a safe bet, the reality is more complex. Market cycles, property quality, and location all influence whether a property will be profitable over time. For those looking to buy, rising interest rates and deposit challenges add another layer of difficulty, making it crucial to weigh these factors carefully when making real estate decisions.
Real Estate Newsletter
This article is a curated summary of various news stories from the past week, offering insights and updates on the real estate market. 25 October 2024
