Capital gain or appreciation of value is a factor all investors hope to achieve when buying a property. Capital gain allows an investor to make a profit on a property, which can then be used to purchase more investments or to pay off other loans, when the property is sold.
But, this doesn’t always happen. Sometimes the property market fluctuates and the market falls, or makes a loss, rather than rises.
Why Real Estate Profit or Loss Happens
Real Estate profit and loss occurs for a number of reasons. The most common being as follows:
The market slumps and not as many people are buying.
Property prices were overinflated when the property was purchased and these prices have now become more realistic.
The property may not have been held for long enough to realise a profit.
According to CoreLogic, a property analytical service provider, between July and September of 2014, 90.7 percent of real estate resales sold recorded a profit, with approximately 30 percent of these doubling their original sales price. Many of these properties had been owned for an average of 9.9 years and those that had doubled in value had been owned for 16.8 years on average. Whereas of the 9.3 percent of properties that sold for a loss, the average length of ownership was 5.7 years.
The Top 10 Australian Regions Least Likely to Make a Loss
1. Illawarra (NSW)
2. Sydney (NSW)
3. Newcastle and Macquarie (NSW)
4. Toowoomba (QLD)
5. Bendigo (VIC)
6. Geelong (VIC)
7. Melbourne (VIC)
8. Central West (NSW)
9. Ballarat (VIC)
10. Southern Highlands and Shoalhaven (NSW)
The Top 10 Australian Regions Most Likely to Make a Loss
1. Mackay (QLD)
2. Townsville (QLD)
3. Fitzroy (QLD)
4. Wide Bay (QLD)
5. Outback (WA)
6. Cairns (QLD)
7. West and North West (TAS)
8. Gold Coast (QLD)
9. Wheat Belt (WA)
10. Bunbury (WA)
Are you thinking of buying property? Then talk to an eChoice consultant about your options Today.
Written by eChoice