Should you sell or buy first?

Should you sell or buy first in 2022?

It has to be one of the most commonly asked questions and one of the biggest dilemmas homeowners face when upgrading, downsizing or changing locations; is it better to buy or sell first?

Considering the current market conditions, the benefits and drawbacks of each option and your own situation will help you to make an informed decision.

What the current Sutherland Shire market looks like

Whilst there are differing schools of thought that suggest typically buying first in a rising market and selling first in a falling one is the best approach, this isn’t always the right solution for the individual and the market at the time.

Throughout 2021 across Greater Sydney and the Sutherland Shire, low stock levels resulted in limited supply and strong demand for certain types of properties. Due to the low number of properties on market and the fear of missing out, buyer demand was at an all-time high. Despite lockdowns and the impact of COVID-19 buyers were not deterred, adapting seamlessly to one-on-one inspections and online auctions, pushing prices to record highs in the process.

Looking at the first half of this year, we still expect to see a relatively strong market, although it is anticipated price growth may start to slow, as more people place their homes on the market. If more stock comes to market, it is predicted that buyer demand will more closely match supply, leading to a more balanced market for those looking to sell and buy. For people looking to sell, even if prices do balance out, you will still largely be locking in the price gains made over the last 18 months.

Whilst interest rates remain at historical lows, it is widely predicted that we will see an interest rate rise. Some economists are tipping rate rises as earlier as August this year, while others are thinking more likely in the early stages of 2023. First home buyers remain active with government incentives still on offer. Strong rental returns and cheap finance will see investors continue to purchase properties across all price brackets, further increasing the number of buyers in the market.

The benefits and drawbacks of selling first

The main advantage of selling now is that you would be listing in what we would consider to be a relatively strong market. Whilst clearance rates have fallen from their historic highs, they continue to sit in the mid-70s from week to week. Stock levels remain low which means quality properties are still in high demand.

Selling first gives you the added certainty of knowing your property has sold and potentially for a higher price than what you may have expected. This allows you to know exactly how much capital you have to spend on your next purchase, which may be more that you had initially anticipated.

“Vendors who list early in 2022 will be selling in a market that still favours sellers. Stock levels are yet to substantially increase which is creating competition amongst buyers and low days on market.

This should put them in a favourable position to purchase their next property, particularly if more stock continues to come onto the market as the year progresses.”

Greg Calderwood – Sanders Property Agents

Selling first also affords you the option to extend your settlement date to allow more time to find your next property. If stock levels continue to increase and prices balance out, then you could be in a favourable position to buy and have a wider variety of properties to choose from.

On the other hand, although unlikely, if stock levels remain low and buyer demand high it can make it more difficult to find a new home. If you are unable to buy before your settlement period ends, you may be forced to rent for a period of time until the right property comes along.

The benefits and drawbacks of buying first

For those looking at buying first, the biggest benefit is that you know where you will be moving to and can negotiate with prospective buyers to try and align settlement dates, ensuring a smooth transition from one property to the next. If you are able to find the right property to purchase now, because stock levels are below average, there is a very good possibility your existing property shouldn’t take too long to sell, allowing you to hopefully avoid a situation where you are paying for two properties at once.

Buying first also allows you to take your time to find the perfect property without the added pressure of needing to find something within a defined timeline.

Right now, it is important to consider that the market is still fairly competitive and if more stock does come onto the market, prices may stabilise, and it could take longer to sell your existing property. You might also have settled on a property due to limited availability only to find something more suitable to your requirements becomes available.

Which approach is right?

In reality there is no right or wrong approach. While no one can predict with certainty what the market will do, what is important to also factor in is what your financial situation affords and what you personally feel comfortable with. If uncertainty is something that doesn’t sit well with you then the conservative approach is typically to try to sell and buy as close together as possible, to ensure you are transacting in similar market conditions.

From what we can see the current market marginally favours selling first, but as mentioned this is dependent on individual circumstances. The market is still performing well and if or when more properties come to market you will be in a good position to buy your next property. Bear in mind that depending on time frames you might need to rent for a period of time before securing your next home.