Whether to buy first or sell first?

It’s one of the biggest dilemmas for any property owner looking to upgrade or downsize, or simply move to a new home. Now COVID-19 has added a whole new element of uncertainty into the mix for anyone looking to make a property move.

We take a look at which approach is right for you in today’s property market.

What the property market looks like right now

Conventional wisdom says that you should buy first in a rising market and sell first in a falling one. That’s because, if property prices are going up, you want to buy at today’s value but sell your own home when it’s worth more. If prices are going down, you want to lock in today’s value when you sell your own home but buy your new one once prices have fallen.

At the moment, Sydney property prices are relatively flat. The median Sydney dwelling price fell -0.8% in July 2020 and -0.9 in June 2020, meaning – on the face of it at least – things won’t be significantly difference whether you buy or sell first.

However, I think there are other factors you should consider right now.

  • There are fewer properties for sale than usual. These low stocks levels mean there’s a limited supply of certain property types and strong demand for quality properties, especially in some price brackets.
  • Low interest rates are having an impact. When combined with government incentives, they mean first home buyers are more represented at the lower end of the market than they have been. On the other hand, falling rents and recent stock market gains mean there are fewer investors.
  • Banks are becoming more cautious about who they’ll lend to. Some people are beginning to find it tougher to get a loan, especially if they work in the hospitality or creative sectors.
  • The banks’ policy of letting COVID-affected borrowers pause their mortgage repayments will end soon. As a result, some people may be forced to sell – potentially leading to more properties on the market.

Read more about how Covid-19 has affected the property market in Potts Point

The benefits of selling first during COVID-19

The main advantage of selling first right now is that you’ll be listing your property in what’s a pretty reasonable property market. While it’s certainly not the sellers’ market we were seeing at the start of 2020, it’s also not dire. Auction clearance rates across Sydney are between 60% and 70% and low stock levels mean that quality properties are in demand.

We’re still making very strong sales, so if your home stands out from the pack, you can expect to have several interested buyers.

That said, no one can tell for sure how long these conditions will last. With mortgage repayment pauses ending soon and JobKeeper and the JobSeeker boost starting to be scaled back, we could see property prices begin to slip further. In fact, CBA has just announced that it believes Australian property prices will come down further – partly as a result of falling rents.

Selling first gives you the benefit of knowing your property should sell. It also lets you know how much you have to spend.

And, if more property starts to hit the market soon, as I expect it will, you’ll be in a strong position to buy.

The benefits of buying first during COVID-19

On the other hand, because stock levels are low, if you sell first it may be difficult to find a home you want to move into. That means you may be forced into renting for a while or potentially paying above the odds to beat off other interested buyers.

In these circumstances, it could be a better idea to buy first and have the certainty of knowing you’ve secured a great property.

Besides, as I’ve already mentioned, so far property prices have stayed reasonably stable. They’re not falling so quickly that you would expect to lose a lot of money just because you buy before you sell.

My view on which approach works best

The reality is that no one can forecast with absolute certainty which way prices will go. So the conservative advice is usually to try to sell and buy as close together as possible so that you’re doing both transactions in the same market conditions.

That said, with more economic pain likely, I think that right now the scales are tilted slightly in favour of selling first. You should be able to get a decent price for your home in today’s market but if people are soon forced to sell, property prices are likely to eventually come down.

If the uncertainty of where you’ll live worries you about selling first, you could try to smooth the process by timing settlement dates for your sale and purchase so they fall simultaneously. For example, you could choose to include a four-to-six month settlement period in your contract for sale so that you can bide your time and offer on the right home when it comes up for sale.

Alternatively, if you do have to rent for a short period while you look for a new home, the good news is that rents have fallen and there are some great places available for lease right now – often on favourable terms.

Want more?

If you’d like to know more about the current market, get in touch 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…