Property investors more likely to lose money than owner-occupiers

Save articles for later

Add articles to your saved list and come back to them any time.

Investing in real estate is far from a sure bet, with new figures from researcher CoreLogic showing owners of investment properties are three times more likely to incur a loss from resales than owner-occupiers.

CoreLogic’s Pain and Gain report compared the sale results of the 83,000 properties sold nationally during the June 2023 quarter with what the properties fetched last time they were sold, to work out the percentage sold at a nominal profit or loss.

Owner-occupiers generally do better than investors, CoreLogic’s analysis of resale property price data shows. Credit: Nine

Nationally, 11.7 per cent of property sales by investors were loss-making, compared with 3.7 per cent for owner-occupiers, making investors about three times more likely to make a loss.

In Sydney, 13.4 per cent of sales by investors were loss-making, compared with 5.9 per cent for owner-occupiers. Investors who sold Melbourne property in the June quarter did worse, with 17.9 per cent of sales by investors realising a loss, compared with 3.1 per cent of owner-occupiers.

A large part of the reason investors did worse is that they are over-represented among owners of units, which do not generally perform as well as houses in terms of price growth.

Buyer’s advocate Cate Bakos says in our big cities – particularly Melbourne and Sydney, whose populations are growing rapidly – it is land value that is going to drive capital gains more and more over the longer term.

“Even if the place is on a tiny bit of land, if it is well located it will appreciate,” Bakos says.

“Property in a blue-chip area will always be tightly held but you can target ‘bridesmaid’ suburbs, provided the growth drivers that apply to the blue-chip suburbs are emerging there.”

Bakos steers clear of apartments bought off-the-plan – both as in investment and to live in. The development could take longer to complete than anticipated and there could be variations in the apartment’s design.

A purchase premium will usually be paid by buyers of new-build apartments that means the resale price could be lower than you paid for it, if you were to sell within the first couple of years of owning it, she says.

Lloyd Edge, a buyer’s agent, property investor and author, says investors can sometimes think units provide a better rental yield than houses.

“The yield may be seemingly a little higher than for a house, but when you account for things such as strata fees the yield tends to be smaller,” he says.

However, many investors prefer units for their lower prices. Investors who have the budget should be looking for a house, including town houses and duplexes, Edge says.

Investors who are intent on buying a unit should seek out smaller “boutique” blocks close to the city in a leafy street where most of those living in the block are owner-occupiers.

Buyer’s agent Michelle May says property investing should not be a gamble for those who do their homework and have patience and a keen eye for value.

Get familiar with the demographics of the suburb and what, if any, infrastructure developments are on the cards that may benefit property values, such as transport links, she says.

“Investors should consider properties they would personally want to live in, ensuring the location, quality and price align with their standards,” May says.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

Expert tips on how to save, invest and make the most of your money delivered to your inbox every Sunday. Sign up for our Real Money newsletter.

Most Viewed in Money

From our partners

Source: Read Full Article