Sometimes, someone else's loss can be your gain: Todd Hunter

GUEST OBSERVATION

It’s no secret that when I invest I am looking for a bargain.

In fact, I am looking for the property owner who needs to liquidate and exit from their property (either home or investment) fast and take a significant loss in the process.

But with interest rates at historic lows, this task can become a lot tougher and probably more difficult, as we look like having another interest rate drop or two.

That said, it may surprise you that even in an awesome property market, like what Sydney is experiencing right now, that 2.7% of all property sales were sold for less than what they were paid for.

And if we were to include entry and exit costs like:

• Stamp Duty
• Legals to purchase
• Loan application fees
• Transfer registration fees
• Mortgage registration fees
• Building reports
• Pest inspection reports
• Depreciation Schedules
• Ongoing council rates
• Ongoing water rates
• Legals to sell
• Real estate sales commissions; then this percentage would probably be more like 15%.

Now, ‘time in market’ could, and can, play in whether you make a profit on a property or not. But that said, 3.2% of those sellers who owned their properties for between 10-15 years sold for a loss. Work that one out.

I know who would be happy, those Sydney purchasers who made it into the 2.7%.

But I thought property prices never went down? Ha, try and tell that to these old owners.

Now the vast majority of property sale losses occurred for owners who only owned their property for three to five years (18.2%) and five to seven years (15.6%).

Basically from the global financial crisis (GFC), but not limited to.

Now not to pick on Sydney, but they got off the lightest. Their percentage of losses in sales were low, but the number of property transactions are high.

Nationally the numbers are scarier, with 9% of all sales making a loss for the June 2014 quarter. That’s 6,332 property owners across Australia who sold their property for a loss within that three month time frame. Units in Cairns, Queensland and Widebay, South Australia were the worst performers though, with close to 50% of sales losing money.

And backing what I have been yabbering on about for many years now, are the oversupply of units in Melbourne, with 18.3% losing money. That’s almost one in five properties sold for a loss. It’s an interesting figure given the buoyant property market there currently.

So, what’s the point in all this?

In trying to locate a deal on a property purchase, they are still there, but you need to be more diligent on your research to find these awesome deals. They are still around in ‘hot’ markets like Sydney and Melbourne but are much more prevalent in cooler markets like Adelaide or ACT.

For our recent investors though, in locations like the Gold Coast (15%), Bunbury (15%), Wyong (7.8%) Mandurah (18.9%) Armadale (6.4%) and Townsville (27%), you can be happy knowing that we have located deals for you in these small percentiles of owners who made a loss.

TODD HUNTER is buyer’s agent, director and location researcher for Sydney-based wHeregroup.