When you are trying to find the right property for investment, capital gains will likely be a key factor in where you buy. The potential for profits through value increases has been rife in the real estate market in the last few years, particularly in east coast powerhouses such as Melbourne and Sydney.
However, the latest edition of the Pain and Gain report from CoreLogic RP Data highlights some slightly different areas that are making forward strides in terms of profitability.
Capital cities still on top
With only 2 per cent of houses and 1.7 per cent of units selling at a loss in the December quarter of 2015, Sydney remained a strong performer in the Pain and Gain report. Melbourne saw 2.5 per cent house sales make a loss, but 8 per cent of units also failed to sell for more than they were purchased. The Australian Capital Territory was the only other city to have more profit-making resales than the capital city average.
This is a reminder that even though annual capital growth has slowed to 9.5 per cent and 11.1 per cent in Sydney and Melbourne respectively, this is still enough for investors and owner-occupiers alike to see dividends when they decide to sell their real estate.
Rising markets across the nation
One type of region that saw an increase in profitable property resales was lifestyle and tourism hotspots. Regional NSW, Victoria and Queensland all had more than 80 per cent of house sales record a profit during the quarter.
"The proportion of loss-making resales [is] trending lower particularly in areas linked to tourism and lifestyle factors"
"We're seeing the trend shifting in regional areas with the proportion of loss-making resales trending lower particularly in areas linked to tourism and lifestyle factors," noted CoreLogic's Cameron Kusher in a March 24 media release.
This should come as no surprise. As people are priced out of capital cities, it seems likely that they will search for more affordable investment prospects in surrounding regional areas. Coupled with growth markets emerging on places like the Gold Coast, there are plenty of opportunities for capital gains in regional Australia.
While conditions remain conducive to taking out a home loan and capital growth accelerates in certain areas of the country, investors can still create excellent opportunities for themselves. However, it is important to keep in mind that there is no 'one size fits all' solution for making a sound investment decision.
At The REIN Group, we specialise in helping people develop strategies tailored specifically for their situation. We might be able to help you find your next profit-making sale.