More than 50 per cent of new apartments bought and re-sold in the five years to 2016 in Melbourne sold at a loss, research shows.

In Brisbane and Sydney, buyers of off-the-plan apartments received substantially less growth than if they’d bought older apartments, an analysis by BIS Oxford Economics of all apartments bought and sold since 2011 shows.

“Based on apartments initially sold since 1st July 2011 and that have since subsequently resold, resales of established apartments have consistently recorded stronger growth than the resale of an off-the-plan apartment,” the research found.

Buyers of established apartments in Sydney achieved the biggest profits when re-selling in the same time period, with 25.9 per cent growth. Off-the-plan transactions returned 7.5 per cent growth.

Off-the-plan, or new apartments, referred to units where a new title of ownership had been created in a development and were then on-sold. Established properties included those that had transacted previously.

In Melbourne, the average aggregate loss for an off-the-plan buyer – determined by adding up all the purchase prices and subtracting it from the sales prices – was 2.7 per cent. Those who bought established apartments saw gains of 7.4 per cent.

In Melbourne, Carlton, West Melbourne and Docklands were the worst performing localities for off-the-plan apartments with 10 or more sales, with losses of up to 7.44 per cent.

Sydney recorded no areas with overall declines – the worst performer was Rose Hill, which delivered gains of 13.2 per cent since 2011.

Brisbane’s Kelvin Grove and West End were the only two areas recording aggregate losses for off-the-plan buyers, with declines of 2.57 per cent and 1.26 per cent respectively.

The chosen timing from 2011 could have skewed this result, BIS Oxford Economics senior manager residential property Angie Zigomanis said.

“Because we have taken 2011 as out starting point, Brisbane probably had a couple of years’ growth first for people who bought in 2011 and perhaps 2012.

“People who have bought since then are probably taking the hit,” Mr Zigomanis said.

Brisbane apartment buyers in the timeframe recorded were still best placed buying established versus new, with gains of 4.4 per cent compared to 1.9 per cent.

Melbourne-based buyers’ agent Miriam Sandkuhler from Property Mavens said the rule of thumb that property prices increase due to land value, not building value, holds true.

“When investors buy off the plan, they are paying a premium which includes the developer’s profit,” Ms Sandkuhler said.

“In many instances, investors can even lose money due to increases in oversupply of similar stock in the area.”

Property experts in the past have been vocal about their refusal to buy off-the-plan — likening it to buying a new car that drops in value the second you take it out of the shop.

But some have made their fortune purchasing new. In Barangaroo, some buyers made $1 million in profit in two years after buying carefully timed off-the-plan real estate.

The question of whether apartments were overpriced or not “depends on the area and how many off the plan apartments are being built”, said Brisbane-based Diaswati Mardiasmo, PRDnationwide‘s national research manager.

It’s also heavily buyer dependent. Some would be willing to pay additional funds for the “breathing room” of not needing to get financing immediately.

“For some this extra time is worth the extra price they may have to pay,” she said.

In particular, those who were intending to live in the property for a longer period of time as a home might find this preferable.

It’s all down to timing and location and those approaching settlement in Sydney risked coming up short if a valuation did not stack up, said Edwin Almeida, director of Sydney-based real estate agency Just Think Real Estate.

“For the last three years at least, people have been paying tomorrow’s prices when buying off the plan,” Mr Almeida said.

He blamed the exuberance of the market, inflated commissions and poor-quality construction for the poor results.

If off-the-plan properties fall in value or were bought for more than their worth, the buyer will need to find a bigger deposit to cover what the bank won’t lend to them.

One seller who recently approached him was the purchaser of two off the plan apartments in Dulwich Hill.

He’d bought the two-bedroom apartments for $950,000 each over a year ago and now faces the difficulty of settling.

“He’ll end up selling at a loss if he sells,” he said.