One in 10 sellers are likely losers: Rismark
Some 9.5% of all Australians who bought and sold a property during the last 12 years suffered a loss, according to an analysis by Rismark International of 3.25 million sales.
The analysis includes the gross purchase-and-sale return – ignoring the crucial aspect of rental incomes.
It also excludes the issue of the cost of borrowing money to fund an investment property purchase.
Factoring in transaction costs, including stamp duties, agents’ fees, council payments and other charges, the net loss tally jumps to about 15% of the sellers since 2000.
Around 5% of all owners who sold homes for less than their purchase price had an annual capital loss of higher than 3%, the reserch found.
The study was undertaken by Rismark International for the Australian Financial Review and looked at all the purchases and then resales of Australian homes between 2000 and 2012.
Suggesting a slight deterioration in the past year, a similiar survey undertaken in July 2011 for Property Observer by Rismark indicated 9.3% of all home owners traded their properties for a loss in the 21-year period from 1990.
AFR colmunist Christopher Joye concluded the research found the typical investor did quite well during the period.
The median compound annual capital return is about 7% before rents and transaction costs.
It was 7.8% per year in the Property Observer study for the 21-year period.
The latest analysis suggests that 62% of all buyers since 2000 have generated annual returns of more than 6%.
"So many have experienced excellent results," Joye says.
"Importantly, the numbers also presume you owned the home outright.
"If you were geared, your underlying equity returns would have been far higher," Joye adds.
Brian White from Ray White told the AFR it was dangerous to talk down the value of property investment.
“I think that it’s misleading to say that if you buy a property, you’ve got a 15% chance of it being a bad investment,” White said.
Joyes notes Australia’s $3.6 trillion private housing market accounts for nearly two-thirds of total household wealth.
