Most investors and homebuyers always want to know the answer to this repeated question: “where exactly should I buy?”
It’s the crystal-ball problem that no one will ever be 100 per cent sure about. We’re always chasing the areas that boom and predicting the suburbs likely to go ahead.
Sometimes you need to look at the past to predict the future.
RP Data recently released a ‘Pain and Gain’ report, showing the areas where people have lost money, and the areas where gains were made.
Of those who have sold in Sydney in the March quarter this year, there were just three suburbs where not one person who sold made a loss. Not one.
They were (one) the blue-chip area of prestigious Hunters Hill, (two) the inner west area of Marrickville and (three) the St George suburb of Botany Bay. No wonder Captain Cook liked that place!
Only seven other suburbs in Australia showed statistics where not one homeowner or investor made a loss this year.
They were Moorabool and Murrindindi in Melbourne, Walkerville in Adelaide, Bassendean, Kalamunda, and Peppermint Grove in Western Australia and Litchfield in Darwin.
However, Sydney also recorded the lowest proportion of loss-making sales, and more than 30 per cent of unit and home sellers made a profit of more than 100 per cent.
RP Data points out the longer a property is held, the more likely it is you’ll make a profit.
In the suburbs where no one lost money this quarter, that trend was evident.
For example, the average hold period in Hunters Hill and Marrickville is nine years and in Botany Bay, it’s 11 years.
Looking at Melbourne, the hold period in Moorabool is eight years and in Murrindindi it’s six years. In Adelaide’s Walkerville it’s nine years.
In WA, people in Bassendean and Kalamunda tend to hold their property for nine years, and six years in Peppermint Grove.
Darwin Litchfield homeowners and investors tend to hold for six years.
It takes time to make money [sam id=37 codes=’true’]
We live in such an instant world and making a profit out of property seems to be about the exact opposite. It’s delayed gratification for a better future, not instant results for today.
When it comes to property, you have to be patient.
But you also have to look for the up and coming areas.
Hunters Hill in Sydney is tightly held, whereas Marrickville has been gentrified and is now considered one of Sydney’s trendy areas.
This has only occurred in recent years.
Botany Bay, in Sydney’s south, would be the next best option for many families priced out of Sydney. It suffers from lots of aircraft noise but is still reasonably close to the CBD.
You can see from the results that as Sydney has boomed, the ‘ripple effect’ suburbs, considered the next best option for families priced out of the inner city, have benefitted.
Buying and holding won’t guarantee a profit, so you need to get it right.
Factor in a blue-chip or gentrifying market, or the next best thing to a more expensive area, and it seems you might have more luck.
Find the next best area in an already pricey city, and you’re also more likely to make a profit.
Investing isn’t about following the crowd but sticking to the fundamentals – and holding.