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Investing for the long term – a timely reminder!

A recently published article from PR Data titled the “Pain & Gain Report” suggests of the 74,595 residential properties resold nationally in the last quarter of 2013, 9.7% recorded a gross loss from the original purchase price.

The report illustrates the effects of the GFC.   The likelihood of making gross profit increases based on the length of time a property has been owned.  Of the homes purchased throughout Australia prior to 1 January 2008 and subsequently resold in the last quarter of 2013 only 5.5% of resales made a gross loss whereas those that were purchased after 1 January 2008 17.6% recorded a gross loss relative to the original purchase price.

Assessing all homes bought after 1 January 2008 and resold in the last quarter of 2013 across Australia, regional Western Australia was calculated as having the second most significant proportion of loss making resales (19.3%) with the Upper-Great Southern region (28.6%) recording the largest proportion of loss making resales.  However, Perth was the second lowest proportion of loss making resales just behind Sydney, Perth recording 4.3%.

The proportion of loss making sales across Perth is at its lowest level since July 2008.  As a snap shot of the Perth councils illustrates where the greatest losses took place:
Council    % loss making resales over the last quarter of 2013

Peppermint Grove    0
Gosnells    1.2
Cottesloe    13.8
Perth    12.3
Claremont    9.7
Cambridge    2.3
Joondalup    2.8
Stirling    3.9
Subiaco    5.4

This article reinforces the basic principle that investing in property is for the long term.  Properties held for a short term are much more susceptible to losses.  The data show that 55.1% of the properties resold between 10-15 years after original purchase sold for at least double the initial price and 95.1% of resales after 15 years more than doubled their purchase price.

Property investors need to understand the benefits of time and compounding.  Over 50% of your capital gain can occur in the last quarter of ownership so don’t wait to buy property, buy quality property and wait!

There is a clear message for investors:

1.    Do your homework and choose your asset wisely
2.    Buying and selling over a short time period significantly increases your chances of incurring a loss.

View the full article here.

Rob Walker

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