Profitability of Property

Corelogic RP data is at it again releasing the latest ‘pain and gain report’ for Australia, and you might be able to tell by the name the report outlines total loses and profits of property in the last quarter of trade.

It is a very interesting report which reiterates that what a solid investment property is. The results show that the overwhelming majority of owners that sold made a profit. I would like to compare these details of those that invested in shares and see how many people made a profit vs how many made a loss. I’ll bet a 1000 to 1 that the results are not even close.

The results showed that “one third (31.9%) of homes resold for more than double their previous purchase price. Across those homes which resold at a profit, the total value of this profit was recorded at $12.9 billion with the average gross profit recorded at $239,855. The data also highlights the fact that ownership of property, whether for investment or owner occupier purposes, should be seen as a long-term investment. Across the country, those homes that resold at a loss had an average length of ownership of 6.2 years. Across all sales recording a gross profit the average length of ownership was recorded at 10.2 years, while homes which sold for more than double their previous purchase price were owned for an average of 17.5 years”

In regards to South East QLD: Just over the last quarter of march 2016, 95.7% of houses across the great Brisbane area have been sold at a profit of purchase price, units have seen 85.9% sold at a profit to original price. The Gold Coast has a lossmaking resale percent of just 13% meaning out of 100 houses sold in the March quarter 87 were sold at a profit to original purchase price. The median profit on the Gold Coast was $97,000 over this time with the median profit in the Brisbane area reaching $152,000.

There are a couple of take homes from these findings:

1. Property is a long term investment
2. You should on average double your money at least every 17 years
3. Focus on growth but try an bring the cost of ownership down (cash outflows) so that you are able to hold multiple properties for the long term