At some stage, your home may well be too small or big for your needs. Or perhaps the size is right, but you want to live in a neighbourhood with better amenities or in a suburb with excellent schools for the kids. If you’re paying off a home loan for a house located in an area experiencing solid capital growth, you may even make a profit when you sell!
According to the most recent RP Data Pain and Gain report, 91 percent of all home re-sales during the second quarter earned a gross profit.
In fact, nearly one in three (30.5 percent) of home sellers at least doubled their purchase amount when re-selling! Referring to this bracket of sales, RP Data elaborated:
“The gross profit on these re-sales was $14.4 billion and the average gross profit per profit making transaction was $225,830.”
Are you living in a hot spot?
RP Data analysed re-sale statistics in states’ capital cities and regional areas. The area with the lowest proportion of re-sales that made a loss was Sydney (2.7 percent), followed by Perth (4.8 percent) and regional Northern Territory (6.4 percent).
In regional Western Australia, 43.4 percent of homes sold during the June quarter made a profit of 100 percent or greater, followed by Perth (40.3 percent), Melbourne (36.8 percent), Darwin (34.5 percent) and regional Northern Territory (33.9 percent).
So if you’re living in any of these locations, there’s a strong chance you could profit when you sell. But what about on a more local scale?
The best suburbs for making a profit
If you’re curious about which suburbs are posting the best figures regarding gross profits, the Pain and Gain report has all the juicy details.
The Sydney suburb of Campbelltown had the highest proportion of re-sales that made a gross profit (99.3 percent), while home re-sales in Ku-ring-gai scooped up the award for the highest median profit ($445,000).
In Melbourne, 97.9 percent of Whitehorse home re-sales during the second quarter made a gross profit, while homeowners selling up in Boroondara earned a median profit of over half a million dollars ($519,350)!
There are numerous hot spots around the country. But aside from areas posting strong capital gains, how else can you determine whether you’ll make a profit?
Hold onto your home for longer
One thing to take into account is how long you’ve held your property for. While investors may flip dwellings quicker than pancakes, homeowners may be more inclined to stick around longer — particularly if they’ve settled into the home or have children attending local schools.
“The likelihood of making a gross profit or loss is quite different based on the length of time a property has been owned. As a stark example, those homes that were previously purchased prior to January 1 2008 … and were subsequently sold during the June quarter of 2014, only 5.2 percent of re-sales were made at a gross loss,” RP Data noted.
“For those homes that were purchased on or after January 1 2008, the propensity to make a loss on the sale climbs substantially.”
So there’s certainly a case for holding onto your property for some time.
Is it time to renovate?
It’s also worth considering whether to renovate your home in order to appeal to buyers.
But be wary not to drag your savings account through the mud by overcapitalising. This is when you spend more on renovation projects than you earn back when you sell — essentially a big waste of money!
Ask local real estate agents what buyers are willing to shell out more for — from large kitchens to modern bathrooms — and embark on renovations accordingly.