It might seem out of order to some, especially considering the conventional rationale is to play it safe by selling first and buying second, but these are far from conventional times.
Only three months into the new year, property prices are rising so rapidly that it’s making it increasingly difficult for Sydneysiders to buy and sell in the same market—one that has seen an increase of 2.5% (or $21,850) in February alone. That’s a jump of about $780 a day, with Sydney home values hitting a median of $895,933 last month, according to CoreLogic’s latest data.
Add a fierce level of competition to the mix and clearance rates above 90%, you’ve got a steady stream of Sydney homeowners furrowing their brows in contemplation over whether to sell or buy first. And for the first time in a long time, it looks like buying first might make the most sense.
Of course, there are a range of risks and factors to consider. If you buy first, can you afford to carry two properties for a period of time? If you sell first, are you okay with renting if you don’t find a new home before settlement? And what happens if you’re priced out of the market in the interim? The average Australian home buyer likely would have to rely on the sale of their home before they can buy another, while those with young families are also more inclined to want their next home lined up before selling, because have you ever tried to move twice with toddlers? Better yet, how high is your pain tolerance?
But while everyone’s situation is different, right now the rising market is making a strong case to buy first and sell second. Due to unusually low stock levels, demand far outweighs supply when it comes to Sydney’s property market right now. As such, typical buying time frames are being stretched while sales campaigns are being cut short.
Essentially, it’s much easier to sell a property right now than buy one, so many are opting to try to secure a new property before releasing their own. As February’s 2.5% increase demonstrates, buyers could end up tens of thousands of dollars better off by buying in the current cheaper market and selling in (what all signs point to be) the more expensive future market, as opposed to selling their homes now and risking missing out.
If the risks involved with holding two properties are a major concern, there are ways to minimise them, including bridging finance priced at interest rates comparable to standard home loans for a period of up to 12 months, or the possibility of renting out one of the properties to offset some of the holding costs (although this has tax considerations which we recommend getting independent advice about).
In an ideal scenario, the gap between both transactions would be minimal, but the market is moving at such speed every week that it’s actually widening for most. And if we’ve learned anything over this past year, ideal scenarios seem to have taken a sabbatical. If market trends continue in the same direction, you could very likely sell in one bracket and then, within a matter of weeks, be buying in a completely different one.
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