A few months can feel like a very long time when you’re watching the property market.
Rates move, prices soften, forecasts change, and suddenly everyone has an opinion on whether it’s the right time to buy, sell, build or sit tight.
But property has always tended to play out over a much longer timeframe.
And some new figures released this week are a pretty good reminder of that.
Cotality’s latest Pain & Gain report analysed more than 94,000 property resales across Australia during the June quarter and found 95.4% still sold for a nominal profit, despite property values falling during the period. The median gain was $371,000.
But the number that really caught our attention wasn’t the profit.
It was the time.
Properties that sold for a gain had a median ownership of 9.1 years.
So this week, rather than getting caught up in what the market did last month, we’re looking at why time can be one of the most important ingredients in a property strategy.
Property Rarely Moves In A Straight Line
Australia’s housing market has softened this year, and the latest resale figures reflect that.
The proportion of profitable sales eased from 96.1% in the March quarter to 95.4% in June, while the median gain slipped from a record $378,000 to $371,000.
But despite the change in conditions, the overwhelming majority of sellers were still ahead of where they started.
A big reason is fairly simple.
They had time.
Profitable properties had been held for a median of 9.1 years, compared with 8.1 years for properties sold at a loss. The difference was even more noticeable for houses: profitable house resales had typically been held for 9.3 years, while houses sold at a loss had been owned for just 4.4 years.
Those extra years can give owners the opportunity to move through different parts of the property cycle and gradually build equity along the way.
It doesn’t mean every property will increase in value, or that holding something longer automatically makes it a good investment.
But it does highlight an important point.
Buying property based solely on what the market might do over the next six or twelve months can sometimes miss the bigger picture.
The Longer View
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For buyers, the better questions are often longer-term ones.
Does the property suit what they are trying to achieve?
Can they comfortably manage the repayments?
Is there enough buffer if circumstances change?
Will the location, home and finance structure still make sense several years from now?
Those questions become particularly important when the market feels uncertain.
Because trying to perfectly time the bottom of a property cycle is very different from making a well-considered purchase that you are comfortable holding through different market conditions.
And there’s another part of the equation that sometimes gets overlooked.
Time doesn’t only allow property values to move. It can also allow debt to reduce.
As borrowers make repayments and potentially build equity, their financial position can look very different several years down the track. That is why the loan structure sitting behind the property matters just as much as the property itself.
The latest figures certainly aren’t a guarantee of what happens next, and the reported gains are nominal figures rather than returns after every cost associated with buying, holding and selling.
But they are a useful reminder of something that can easily get lost when property headlines change every week.
Sometimes the most important market movement isn’t what happens over the next three months.
It’s what happens over the next five, ten or fifteen years.
For buyers who have done their homework, structured their finance properly and chosen a property that suits their longer-term plans, a little patience can be a pretty valuable part of the strategy.
Thanks again for your continued support and partnership. We’re proud to work alongside you in helping clients look beyond the short-term noise and make property decisions with the bigger picture in mind.
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