When will your home turn a profit?

If you want to profit from selling your house, you may need to hang onto it for longer than you think.

Australian home owners who turn a profit from selling their home own it for an average of 9.9 years, according to a new report.

The latest Pain and Gain report, released yesterday by CoreLogic, also found that homes which sold for more than double their previous purchase price were owned for an average of 16.4 years.

The report compares the most recent sale price of homes to the previous sale price to determine if it sold for a profit or loss.

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Sydney, Melbourne best performers

It found that Sydney was the best performing capital city for resales, with only 2% of its property resales being loss-making. Melbourne was the next best performer, followed by the ACT, Brisbane and Hobart.

The hardest hit areas were housing markets linked to the resources sector, such as mining heartlands in outback Qld and WA.

It really does come down to timing when you’re buying and selling.

CoreLogic Research Director Tim Lawless says the message for home owners is that property does tend to be a better long-term investment proposition, but it depends greatly on the property growth cycle.

“It really does come down to timing when you’re buying and selling,” Lawless says.

“If you owned your own home in Sydney for the past five years, you would have made a decent capital gain because the market was so strong.”

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Coastal lifestyle areas on the improve

The other big winners from the report were coastal lifestyle areas, which have seen a significant turn-around.

Illawarra, Newcastle, Geelong, Richmond-Tweed and Cairns were all big improvers, with stronger tourism and more lifestyle buyers re-entering the market.

“A few years ago, Cairns was showing nearly 50% of its sales as loss-making – it’s now 25%,” Lawless says.

“In 2008 we saw people’s retirement savings halve in the space of a few months, but there’s been a real rebuild of wealth and we’re seeing a lot of those retirees now put their retirement plan into action and targeting those lifestyle markets.”

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While housing investment has boomed in Australia in recent years, the data signals a warning for investors, with owner-occupier housing stock more likely to turn a gross profit than investment stock.

Lawless says investors are more willing to accept a loss than owner-occupiers.

“If they do make a loss they can write that loss off against future capital gains,” he says.

“If they see their prospects for capital gains are lessening, or they see the rental yield isn’t enough to pay down their interest payments, they will simply sell and accept the loss.

“For owner-occupiers, accepting a loss doesn’t have any tax implications that can be written off at a later stage.”