Short-term investors get shafted

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RP Data’s latest Pain and Gain national report shows timing is everything when it comes to buying property in Australia and those who buy to hold for the long-term reap the best rewards.

The report revealed that of 69,390 residential property re-sales over the June quarter, 12% saw a gross loss on their original purchase price.

The remaining 88% of June quarter re-sales made a gross profit.

RP Data research analyst Cameron Kusher said the largest proportion of the losses were found in lifestyle markets like Queensland's Gold Coast, with units suffering the greatest losses.

Regional areas around resource-driven nodes and agricultural areas showed the strongest re-sale conditions, with Queensland's Central West, Victoria's Barwon and Central Highlands regions and Perth all recording fewer than 6% of June quarter transaction losses.

Kusher said the likelihood of making a gross profit or loss is heavily based on the length of time a property has been owned.

"As a stark example: [of the] homes that were purchased prior to January 1, 2007 (pre-GFC) and then sold during the June quarter of this particular year, only 7.2% [saw] a gross loss… for homes purchased on or after this date, the propensity to make a loss on the sale climbed substantially,” Kusher said.

"If you look at those properties which sold at a loss over the quarter they had an average hold period of just five years. This highlights the long-term nature of investment in residential property and that if you chase short-term profits you are likely to be more susceptible to losses.”

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