03 July 2013 Majority of homes sell for profit

More than 80 per cent of all homes that sold in the first quarter of 2013 sold for a profit, new research has revealed.

Statistics provided by RP Data’s research director, Tim Lawless, indicate 87.3 per cent of homes sold for a profit, while just 12.7 per cent of all March quarter re-sales transacted at a loss.

Mr Lawless said the lower interest rate environment appears to be creating an increase in consumer confidence across the property market.

“We’re now seeing a lot more activity around sales compared with this time last year,” he said.

RP Data recorded 58,677 residential property re-sales nationally over the first quarter; of these, 12.7 per cent recorded a gross loss from the original purchase price, representing a total loss value of $463.9 million over the quarter.

Conversely, 87.3 per cent of all March quarter re-sales recorded a gross profit when compared with their original purchase price, with this total profit coming to $9.6 billion.

Units in 'lifestyle' locations such as Queensland’s Gold Coast region experienced the largest re-sale losses, with 37.1 per cent of all March quarter re-sales in the area transacting at a loss.

For regional areas, particularly those associated with the resources sector, Mr Lawless said there were much fewer re-sale losses.

Queensland’s central west, Victoria’s Loddon region, and the Kimberley and Pilbara regions of Western Australia all recorded fewer than 5 per cent of March quarter transactions at a loss.

“The likelihood of making a gross profit or loss is quite different based on the length of time a property has been owned,” Mr Lawless said.

“As a stark example, of those homes that were previously purchased prior to 1 January 2008, and were subsequently sold during the March quarter of this year, only 8 per cent of re-sales were made at a gross loss.

“For those homes that were purchased on or after 1 January 2008, the propensity to make a loss on the sale climbs substantially. Of those homes that sold over the March quarter, 25 per cent recorded a gross loss relative to the previous purchase price.”

The average length of ownership for properties that incurred a gross loss over the March quarter was just 4.8 years.

Properties that recorded a gross profit were held for an average of 9.7 years, while those homes that recorded a gross profit of more than 100 per cent were owned for an average of 15.4 years.

Reproduced in full with permission: TheAdviser Majority of homes sell for profit 21 June 2013

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