The Myth of Short-Term Property Investment

Posted by Jack Guthrie

A long-term view should be taken to create the best outcome for your investments. Read this week’s research blog to understand how holding long term benefits your portfolio.

One thing that I have learnt from researching various markets is the importance of holding long term. No matter where you look in Australia or in overseas markets, holding long term is a golden rule to creating wealth through property.

As a result, we pay no attention to the promises made by get rich quick “property experts”. Such investment strategies as Property Options (where direct ownership is never held) and short-term investment in property “hotspots” have been found to create more confusion than good to Australian buyers recently.

The reality is that markets move in cycles and to create the best opportunity to leverage off property, investors must hold their property long enough to allow their assets to experience the positive effects of the market. A good starting point is a 10 year view, as a minimum hold. This lesson has been highlighted by recent data from CoreLogic’s Pain and Gain report:

2018	Average Hold period
Properties that sold at a loss	4.7 years
Properties that sold at a gain	8.7 years

Melbourne Property Sales (Source: CoreLogic, Pain & Gain Report)

The above statistics were taken from the greater Melbourne Property market. The average investor who held their property for an average of 4.7 years sold at a loss, whereas the investor who made a profit on their assets held for an average of 8.7 years. The difference between those who experienced a positive and negative result is simply time – imagine the results of an investor who had not sold at all.

A hard truth from this data is that property takes time to grow, which does not suit the impatient. It is all too common that investors ask themselves questions such as “I have held my property for 2 years and it has only grown by 5%, should I sell?”. Unless your circumstances don’t allow you to, the answer is a resounding no. Property can take time to grow, and occasionally move backwards before it moves forwards.

Rome wasn’t built in a day, and neither was a great property portfolio. Heading into 2019, investors should realise that noise in the property market place shouldn’t motivate them to sell. If you ask me, the best time to sell is never.

Posted by Jack Guthrie, on 18th Dec 2018