Should I Buy First Or Sell First?

If you’re an investor or owner-occupier, one of the biggest questions you’ll face is whether to buy first or to sell your existing property so you have the funds to invest in something new.

We look at the pros and cons of both strategies to help you determine what’s right for you.

Investors and owner-occupiers have been facing a red-hot property market in recent months, particularly in Sydney City and suburbs such as Pyrmont, Haymarket and Ultimo, where the average 2-bedder can go for $900-1.3 million.

While that can be welcome news if you’re selling, buyers are finding it much tougher to get their hands on a bargain right now, due to the perfect storm of historically low-interest rates, and rising house prices. However, there are early signs that the heat may be coming out of the market, according to Core Logic’s July update.

So what does that mean for selling and buying? Let’s take a look at both approaches.

The argument for buying first

We’re currently in a seller’s market, which means greater demand, more competition (for the properties that are on the market) and higher house prices.

But that doesn’t mean you shouldn’t buy.

If you have a decent income and enough equity in your existing home, you can leverage both in order to secure the finance you need to snap up another property. You may also have additional confidence that if you decide to sell in the same market, you’ll have no problem off-loading your property for a really great price.

The downside to buying first in a booming market is that you’ll run the risk of paying more for a property than it’s actually worth if the market turns. And, if your finances are uncertain, buying first can be risky – it may leave you juggling two mortgages for a while, and you also can’t be sure that your home will sell for the price you need, or how fast it will sell.

Plus, if you buy first and at the height of the market, and sell once the market has cooled, there is the possibility you could lose out financially.

The argument for selling first

If you want a better idea of your purchasing power and cash flow, selling first might make more sense – especially in the current market.

And selling in a seller’s market means you’re likely to get a great price for your home – giving you the freedom to sign on the dotted line for another property and possibly have funds left over for other investments (or renovations).

It’s a great approach if you’re downsizing or planning a sea-change or tree-change – as you’re likely to get more for your property in the current market. Similarly, if you’re selling then buying in the same area, you’ll know exactly what you have to spend and whether you need to get additional finance before you make any offers.

The downsides of this approach? If you sell then can’t find a property you want to buy for several months, you’ll have to factor in potentially moving into a rental or budgeting for storage and removalists several times, which can be pricey. And if the market keeps rising you can be left out, or lose out.

The market right now

Sydney’s property market has been on an upwards trajectory for over a year, and demand is still outstripping supply.

According to CoreLogic data in the six months to 30 June, the median dwelling price rose 15.4%. With the city in lockdown, things could change, but to date, the market has held up well, and global trends indicate a rebound is typical after a lockdown, which certainly reflects what we saw last year. Prior to the end of the financial year, most banks were predicting price rises would continue throughout 2021 and into 2022.

So what’s right for you?

Whether you sell first or buy first depends on a range of factors, including your goals and where you’re at in life. It’s important to look at your financial position, weigh up your options – and seek professional advice before making any decisions.

It will depend on whether you’re upsizing or downsizing, and which way you think the market may be moving. But, ultimately, the best time to move is when it’s right for you.

Talking to experts in the market in which you’re buying is also a great idea so you can get a lie of the land and make a more informed decision that works for you. Good luck!

Want to chat to us about selling or buying in the Sydney City area? We’d love to hear from you.

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