Property doesn’t always go up…

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While there is much coverage about the seemingly endless and meteoric rise in real estate values, it may be a shock to some people to hear that occasionally property is sold at a loss. In fact the recent “pain vs gain” report from CoreLogic RP Data, for June quarter 2015, shows 1 in 5 (20%) of all residential sales in the Melbourne Council region were transacted at a loss. Approximately 254 people sold their property for an average loss of $28,125… and that is before costs, so the net loss number would be much higher.

The report shows the Melbourne City Council precinct tops the chart with 20% of owners selling for less than what they paid during Q2, with 2 other council regions hitting double figures being Stonnington at 12%, and Moonee Valley at 10.3%. Some other dishonourable mentions are Yarra – 9.9%, Whittlesea – 9.3% Hume – 9.0% and Port Philip – 8.8%. Across all of Melbourne 5.7% of property sold at a loss, which is less than 6.6% 12 months ago.

The other interesting analysis in this report is the average holding period for sales transacted at a loss vs a gain. For apartments only, across all Metropolitan Melbourne, the average “loss sale” was held for 5 years and the average “gain sale” was held 9.7 years. Obviously “gain sales” will be held longer than “loss sales”, but the average “loss sale” holding period of 5 years seems reasonably high. This suggests there is more to this issue than just sales where a unit is bought and sold within 1 or 2 years. We have advised previously that 5 years is an absolute minimum hold time for investment units and 10 years or more is preferable, and this report vindicates this. The report shows a large variation in the percentage of sales made at a loss vs gain in each municipality, again reinforcing our advice that some areas (and specific developments) are better buying than others.

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Written by a 4th generation real estate agent Apartments Made Easy gives you the tools and tells you all you need to know about how to buy, sell, own, lease, and manage your apartment successfully.

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