Market activity has picked up significantly in different parts of Australia, particularly in Sydney and Melbourne. If you’re hoping to both buy and sell property, you might be wondering whether it’s more ideal for you to wait for a buyers’ market or to wait for a sellers’ market. This will depend on whether you’re upsizing or downsizing.
In this article, we’ll be using the term upsizing to mean selling your home and then buying a more expensive one. Likewise, downsizing will mean selling your home and then buying a cheaper one. Of course, the more expensive home you’re buying could be physically smaller than your current home and vice versa.
When it’s a buyers’ market, property prices are declining and buyers have bargaining power. Of course, you’d sell your home for less than what it could be if you were selling in a seller’s market, however, you’d also buy your new home for less. Therefore, if you’re upsizing, it makes sense to buy and sell during a buyers’ market. However, downsizers could lose out.
To make it simple, we’ll give an example of two properties that were bought five years ago at $500,000 and $1,000,000. However, the market has fallen by 10% and it’s now a buyers’ market. The first property is now worth $450,000 and the second property is now worth $900,000.
If you were upsizing from the cheaper property to the more expensive property, you would be missing out of $50,000, however, be saving $100,000. Overall, you would be making a profit of $50,000. On the flip side, if you were downsizing, you would be missing out on $100,000 and only saving $50,000, making a loss.
When prices have been going up, the market is in favour of sellers. Obviously, the opposite facts will be true. You’ll be able to sell your home for more than what it would go for in a buyers’ market, however, your new home will also be more expensive. In this case, downsizers can benefit whereas upsizers would be missing out.
We’ll give the same example of two properties worth $500,000 and $1,000,000 five years ago. However, in this case, the market has gone up by 10% and it’s a sellers’ market. The first property is now worth $550,000, $50,000 more. The second property is now worth $1,100,000, $100,000 more. By upsizing, you would be missing out on $50,000 whereas if you were downsizing, you would be gaining $50,000.
What should you do in the current market?
Of course, the market right now across the nation varies drastically. In Sydney and Melbourne, most people are predicting that prices will only continue to go up in the new year. Even in other areas of Australia, the forecast looks like there will at least be stable growth even if prices don’t shoot up.
If you’re hoping to upsize, it might make sense to do so sooner rather than later with prices only moving more into a sellers’ market. It’s hard to know when the next buyers’ market will come. However, if you’re looking to downsize, you could benefit from waiting a little longer for prices to continue increasing.
Remember that not all markets are on the rise at the moment. It’s important to look at how prices are moving in your specific area. You can speak to local real estate agents as well as look at a range of different resources online to help you get an understanding of the market activity.
Guest author: Ellen Orton is the Head of Business Operations at OpenAgent.com.au, an online agent comparison website helping Australians to sell, buy and own property.