It is definitely no secret that the market has seen a cooling off from the excessive FOMO (fear of missing out) buying and hot buyer competition for property that we saw during 2021, however this sort of market does present its own set of opportunities.


Please allow me to explain…

Naturally everybody wants to know the best time to take action when buying a home to try and ‘outsmart’ the market. Seasoned professionals have an almost impossible time trying to pick the exact top or bottom of markets – regardless of the investment category. In fact we never truly know where the exact top or bottom of the market is, until prices have turned and by then it is too late.

You will quite often hear real estate agents proclaiming that ‘now is the best time to buy’. The truth is, no one knows with absolute certainty the exact best time to buy, however with the market turning or at least softening, here are some tips to help you decide whether upgrading now is the right move for you.

  • If you are a seller looking to upgrade to a more expensive home or a better area during a down market, now could be a good time. The longer you wait to sell, the lower the price your current home can fall.
  • If you can arrange for alternate housing, another strategy is to sell now, then buy your new home after settlement. This puts you ahead of the field allowing you to leverage your offer without requiring a “subject to another sale” condition.
  • If you sell and buy simultaneously, you will still be ahead of the game because the price reduction on the purchase is greater than the loss on the sale, as outlined in the example later.
  • You believe the home will be a long-term investment: First-time home buyers can take advantage of a down market to buy a house that will, in theory, increase in value over time and result in a good investment. With less competition for property, it may also mean that first home buyers may have a greater chance of securing a property with more of the attributes that they are wanting.


Taking a loss on selling your current home?

For example: your current house is worth $1,500,000, but due to the higher number of houses now on the market and limited buyer activity, you reduce your price by 10%. So, instead of receiving $1,500,000, you would get $1,350,000 and ‘lose’ $150,000.


Real profits and savings

Now, consider this: Say you bought this home ten years ago and paid $700,000. You’re still ahead $650,000, less the costs of sale etc. If you are planning to move up to a $2,000,000 house, which is located in the same, subdued market, you could probably buy that house at that same 10% discount or $1,800,000. It would mean you had saved $200,000 – or more, as luxury markets have previously shown to suffer more in downturns.


Summary of buying and selling numbers

  • You sold your home for $150,000 less than what it was worth during a stronger market
  • However you bought your new home for $200,000 less what that was worth is a stronger market
  • In theory that should put you $50,000 ahead, potentially covering some or all of the transactional costs involved in upgrading. Not to mention the growth expectations in the upgraded home will likely far exceed growth on your original home.

Obviously this is a very basic way of looking at it and there are other factors that need to be considered. One of those is interest rates. Interest rates are expected to rise over the next 12-24 months. Locking in a lower interest rate now may mean that you can afford the repayments and borrow more money than what you will be able to afford in the near future. It is important not to over-extend yourself financially though. A good strategy is to weigh-up all the pros and cons before making the decision to buy or sell. Don’t panic over newspaper headlines. Speak to your finance broker or financial adviser, or both, then make an informed decision. When you are ready to take action, speak with a real estate consultant that you feel will put your needs first. (I can recommend one if you like!)

If you would like to more about upgrading your home contact me (Andrew) anytime on 021 55 77 99 to schedule a time for a coffee and a chat.

Posted May 2022