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Property never goes down in value

Video Transcription

The more you understand the most common mistakes that investors make, the better your likelihood of building lasting wealth.

In this series of short videos, I discuss the common mistakes I’ve seen investors make.

Today we discuss if investors should invest on the basis that properties NEVER go down in value.

I know some property spruikers entice naïve investors to buy properties with the claim that property values always keep rising – but is that correct?

Watch as we explain:

Each quarter Core Logic releases its Pain and Gain Report giving insights into which type of properties are resold at a profit or loss.

While the vast majority (89.8%) of properties sold in Australia deliver their owners a profit, some trends have emerged:

  • Around 10% of all properties sold sell at a gross loss for their owners.
  • The longer you hold the property the less likely this is to occur
  • Apartments were more likely to sell at a loss than houses. This is most likely due to the high premium many investors paid for their new unit.
  • CoreLogic reports that in the last quarter Melbourne units were 10 times more likely to re-sell at a loss than houses. This was much the same in Brisbane (9 times) and Canberra (8 times). On the other hand, a greater proportion of units re-sold for a profit than houses Sydney and Hobart over the last quarter.
  • More regional properties sell at a loss than those in our capital cities.

 

Currently locations where there is a high supply of new apartment projects are likely to suffer with more properties selling at a loss due to the significant oversupply. Places like the Brisbane CBD and Fortitude Valley or Paramatta, Harris Park, Homebush Zetland, Ryde in Sydney.

I would also avoid locations where the residents are more likely to suffer from mortgage stress. These tend to be outer suburbs where young families have stretched their finances.

And as always, I would steer clear of the many property spruikers disguised as investment advisers but who are actually working as project marketers for developers.  They lure naïve investors in with their get rich quick schemes – but that’s not how property works.

As Warren Buffet said: “Wealth is the transfer of money from the impatient to the patient.”

With thanks to Michael Yardney's PropertyUpdate.com.au

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