Conventional wisdom has tended to be that you should wait at least five years before selling your home in order to be sure of making a profit.

This, some experts say, should give you enough time to ride through a property cycle and experience enough capital growth to absorb the cost of stamp duty, solicitor’s cost and other fees you had to pay to acquire your property in the first place.

But, while this may be a general rule of thumb, we don’t necessarily agree.

The market doesn’t rise steadily

The simple fact is that while Sydney property prices have tended to rise in the long term, they don’t rise at a steady rate. Instead, there tend to be short periods of strong growth, shorter periods of sharp falls, and longer periods where the property market doesn’t really do much.

Take the past five years, for instance.

Over 2018, Sydney’s median property value fell -5.1%. In 2019, it rose 3.7%. In 2020, it rose another 3.7%. In 2021, it lifted 26.7%. Then in 2022, it fell -12.1%. This year it has already risen another 5.3% to 30 June.

That means if someone bought a home for $1,000,000 at the beginning of 2018, they could expect the value of their property to look something like this.

Date Property value Gross profit % gain loss
1 January 2018 $1,000,000
1 January 2019 $949,000 -$51,000 -5.1%
1 January 2020 $984,113 -$15,887 -1.59%
1 January 2021 $1,020,525 $20,525 2.1%
1 January 2022 $1,293,005 $293,005 29.3%
1 January 2023 $1,136,551 $136,551 13.7%
1 July 2023 $1,196,788 $196,788 19.7%

* Source: ABS Residential Property Prices Indexes 2018-2021; CoreLogic Hedonic Home Value Index 2022 and 2023

On face value, this shows that the owner would have started making a profit in 2021. However, given stamp duty on a $1 million home is close to $40,000, they wouldn’t really have turned a profit until the booming market of 2021.

As the table shows, however, people who bought and sold at various times during that period would have made more or less money. For instance, someone who bought at the start of 2019 and sold at the start of 2022 would have made a gross profit of $344,005, or 36.2%. However, the person they sold to at the start of 2022 would have suffered a $96,217, or -7.4% loss between then and now.

Different property types perform differently

The other factor that needs to be mentioned is that the market doesn’t perform in unison. While Sydney’s overall median price may have followed the pattern in the table above, apartment and house prices have diverged over the past few years. Houses tended to outperform the median during the pandemic, with more people searching for properties that offered space.

It’s also worth noting that premium areas such as ours tend to be less volatile than the market more generally. We may not always experience the massive gains that some “up and coming” areas do, but at the same time, we tend not to experience the same losses in downturns either, as the table below shows.

Potts Point median apartment value

Date Median value Difference
July 2018 $730,000
July 2019 $730,000 0%
July 2020 $755,000 3.3%
July 2021 $885,000 21.2%
July 2022 $850,000 16.4%
July 2023 $900,000 23.3%

*Source: suburb profile data.

This shows that because our market is less volatile, anyone who bought at any point on the timeline could expect to have made at least some profit if they still held their property today.

That said, even though prices are rising, the market now is not currently like it was during the boom of 2021, and vendors need to be patient.

The prestige market a whole different category again

While these tables show the pattern for the past five years in both the broader Sydney and Potts Point markets, they don’t reflect what has been happening in the prestige market.

There are far too few premium properties in Sydney for the number of buyers, and this market tends not to be impacted by the same factors as other segments. For instance, because most premium buyers use cash, interest rates don’t come into play.

That means it has risen strongly in almost every one of the past five years.

While there isn’t enough market data to show the trend for Potts Point prestige apartments over the past five years, the median value of three-bedroom apartments in nearby Darling Point offers a good guide for how rapidly prices have grown in this segment.

Year Value Annual growth Total growth
2019 $2.835 6.2%
2020 $2.8 -1.2% -1.2%
2021 $3.525 25.9% 24.3%
2022 $4.5 27.7% 58.7%
2023 $5.253 16.7% 85.3%

* Source: Domain suburb profiles

Given the high demand and limited supply, anyone who bought into the prestige market could expect to have made a profit much quicker than in other market segments and could generally expect to sell for a profit, even if that sale takes time. They’re also likely to have made a much greater profit than other property owners.

Investment vs primary residence: why do you own the property?

While these tables go some way to showing how long it takes to make a profit in the Sydney property market, whether or not you should “cash in” your property for capital gain largely depends on what you intend doing with any profit you make.

If you’re moving up the property ladder, it often makes sense to sell your home in a quieter market when the gap between property prices narrows. If you’re looking to downsize, sometimes the reverse can be true.

If you’re a property investor, you’ll need to do your own analysis of whether you can achieve better returns somewhere else. But with rents on the rise and the inner city in demand, it’s difficult to beat quality Sydney property as a long-term investment option.

In reality, data shows that the median hold time for a property in NSW in recent years has been 9.7 years for all purchasers, extending to 10.5 years for owner occupiers and contracting to 8.8 years for investors.

Want more?

If you’re interested in buying or selling in Potts Point and the eastern suburbs, contact my team today.

Article by Jason Boon

In a real estate market that is the focus of Australian, and indeed worldwide attention, Jason Boon's results in the Sydney scene make him a highly significant figure within the industry. A long-term specialist in the Potts Point and inner eastern suburbs area, he is uniquely placed to leverage his skills and local knowledge as the area undergoes significant change and diversification. Jason ha…