Property Investment
3 min read
In property one thing is clear: the longer you hold, the more likely you are to make money.
On the flip side, buying and selling quickly is much riskier ... and new data from CoreLogic shows this old trope is still true.
Every quarter they split property sales into two groups. On one side are those who made money from their property sale. They sold their house for more than they bought it for.
On the other side are those who, unfortunately, sold their property for less than they bought it for. They lost money.
What separates these two groups? Time and again, the one key difference is that the people who made money held onto their properties for longer. On the other hand, the people who lose money tend to sell more quickly.
In fact, 97% of the time the people who made money held on for longer than the group that lost money. Only 3% of the time did people lose money after holding a property longer than those who made a profit.
As of early 2024, those who made a capital gain held their properties for an average of 9.2 years. Meanwhile, those who sold at a loss held for just 2.7 years.
To be clear, holding a property for a short time doesn’t guarantee a loss … and holding on to a property for a long time doesn’t guarantee a profit, but the trends are clear.
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As a long-time property investor, the longest I’ve held onto a property is about 15 years.
Generally, I tell investors that 10 years is the minimum, especially in major locations like Auckland, Wellington and Christchurch. And in smaller regions property buyers should have an even longer-term mindset when it comes to holding on to houses.
Although it often feels like house prices “always” go up, between 2008 and 2015 Wellington house prices were flat for 7-8 years. And if you bought at the recent peak of the market, you may have seen your property price drop as much as 22% a year.
That’s why there can be cases where someone holds a property for a long time and still sells it at a loss.
For instance, in 2016 those who made money held their properties for 8.3 years, while those who lost money held for 8.1 years (almost the same duration). This unfortunate scenario is likely due to regional property booms.
Between 2007 and 2016, property prices in many regions were flat; the Gisborne property market had a sustained flat market for 12 years.
So, if you bought in these regions around 2008 and sold five or six years later, you could have been in the group that sold their property for less than they bought it for.
Time may not heal all wounds, but it certainly heals most of them.
This message is especially relevant right now, as some people who purchased properties at the peak of the market in 2021 might be seeing their property values decline.
Auckland house prices, for example, fell about 23% from the peak to the bottom of the market. At this point, with relatively high interest rates lingering and house prices going sideways, it’s tempting to want to throw in the towel.
While some people might be tempted to sell and take the loss – data suggests holding on a bit longer could lead to a better outcome.
Managing Director, 20+ Years' Experience Investing In Property, Author & Host
Andrew Nicol, Managing Director at Opes Partners, is a seasoned financial adviser and property investment expert with 20+ years of experience. With 40 investment properties, he hosts the Property Academy Podcast, co-authored 'Wealth Plan' with Ed Mcknight, and has helped 1,894 Kiwis achieve financial security through property investment.
