I purchased a block in a new subdivision near Busselton WA back in 2006. Unfortunately that was just before that market fell flat. I weighed up selling for a loss, and instead decided to build a rental on it in 2011. Its been rented since. But there has been zero capital growth in all that time. If i was to sell today i'd still walk away with a $20K loss at best. I worry about the lost opportunity cost in all that time and the possibility that the loss could become bigger. One consideration is that property prices elsewhere (eg Perth metro) are historically low. Would it be wise to wear the loss from selling and then reinvest elsewhere in the hope of a capital gain?
It really depends if you think you can do better with the capital and borrowing capacity elsewhere, minus some transaction costs. Another way to look at it is, would you buy that property now as an investment if you got a discount on the purchase equal to your transaction costs... Or would you buy something else? Also, this sort of smells of a lack of strategy overall with your purchase, apart from "buy and pray". If I was advising you, I would be strongly recommending having a stronger strategy for what you're going to do with the money now once you sell...
I think the metro area will pick up a lot quicker than the South West. There really is a lot of supply down there. Personally i would sell and look for other opportunities.
Not knowing all the facts I probably would sell it and reinvest in Perth. I'd be very very careful what I put my money into Consider all the scenarios though 1. is it preventing me from saving another deposit and/or get a loan for another IP? If not then perhaps keep it and get another loan to invest in Perth 2. if I sell it, how much can I borrow to invest in Perth and where/what would I buy?
I'm almost certain that just about anywhere else would see more capital growth. No chance. I would not see it as a good deal even if it was 20% below current market value. My aim is to recover the loss I will incur when I sell. For that I need an investment which would ideally deliver 6% PA capital growth averaged over a 5 year period. While I hold this property, I cannot borrow to secure another.
Is it costing you money to hold and do you have any equity in it after sale costs? If yes to either if those then, considering your responses above, I'd say sell.
