The higher they climb, the more likely they will fall

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In our last post, we took a closer look at resales in the Western Suburbs.  Unchanged, we were seeing growth rates of 7% per annum.  Renovated and extended, growth rates were higher – 21% per annum.

But not all properties change hands at a profit.  Some make a loss.  What sparked our interest in Cottesloe, Dalkeith and Nedlands in the first place was a recent article showing differences between the suburbs in profits and losses.

We’ve long had an interest in resales, finding them the best indicator of the underlying growth of a suburb.  And as we saw in last week’s post, even properties resold in the price stable years had grown in value.

To get a good handle on resales, we have focused our analysis on those properties that were largely unchanged between sales, to more accurately reflect underlying market trends.  We have also removed from the data any transactions that could affect the credibility of the data e.g. divorces etc.

Over the longer term, as expected, after being held for 5.7 years on average, 91% of properties were resold at a higher price than they were bought for.

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However, since 2011, each suburb has seen an increase in the proportion of properties sold at a loss, reflecting the larger impact of properties bought during the peak and resold after the market had come down from that peak.

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In examining the data, we realised that something else was at play.  Examining resales, it is clear that the houses that were bought for under $1m still tended to gain in value, but that losses were sustained in houses originally bought for $2m plus.

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In recent years, when house prices have come off the boil, losses were more likely to be sustained for premium properties than for those that were more moderately priced.

There’s still money to be made in Perth’s premium suburbs.  But like anything, your profit depends in part on your original investment.  And as this data surely shows it is wise to do your homework before purchasing a premium home in a premium suburb!

This is what PropertyESP does best – we get into the nitty gritty like no other agency in WA.  Next time you are thinking about your price point for a project contact PropertyESP – we will help maximise your sales – guaranteed!

 

 

 

 

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