Sell now or wait? Deciding when to sell a property

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Deciding when to sell an asset as large as a property is a big decision. Whether it’s the home you live in, or an investment property, there are many things to weigh up.

Yet, it can be hard to ignore the headlines and not get swept up in what’s happening in the market. The RBA has forecasted that national housing prices will decline by 11 percent peak-to-trough by late 2023*.

But the reality is, no-one really knows what will happen with property prices. Case in point, many expected a global pandemic to burst our property bubble, but despite an initial dip, the opposite happened. A combination of lower interest rates, financial support packages (e.g HomeBuilder scheme) and a rise in demand led to average national house prices increasing almost 25% in the two years leading up to February 2022#.

While periods of rapid growth or decline can happen, it’s important to remember that property, which generally has a long-term investment horizon, is often about ‘time in the market’ and not ‘timing the market’. And, it’s also important to remember that good timing is not always just about (buying and) selling a property at the best possible price – your own personal circumstances and plans for the future are also big considerations to factor into an informed and rational decision. Below we’ve covered some of the potential key things to consider when deciding when to sell.

Your next move

If you’re looking to sell, and buy another property, a downturn in property prices might not be all bad news. A drop in value of the property you’re selling might be partly compensated by a lower purchase price on your next home.

However, if you’re selling, for example, an investment property, and have no plans to buy again, then the selling price may have an even bigger impact on your financial future. As such, depending on your circumstances, it may be worth waiting to see what happens in the market.

The opportunity cost

Most financial decisions have a trade-off, which is why they can be difficult to make. When many things are unknown, at some point you may need to take a leap of faith and go one way or another. 

When thinking about selling property, often the opportunity cost can be overlooked. In other words, the potential loss from not taking a different action.

For example, if you have an underperforming low-quality investment property, the opportunity cost of not selling might be not being able to direct your money into a quality investment with the potential of producing a higher long-term return. 

Your need vs desire to sell

Is there a reason you need to sell your property now, or can you wait to see what happens in the market? If there is a pressing reason to move, for example, you need to relocate for a new job or move closer to family, this may provide enough reason to consider selling sooner rather than later. By contrast, if there is no rush and you have plenty of time on your side, you could consider observing what happens in the market and waiting until you believe your home price has recovered to an acceptable level (to you and your circumstances).

The cost of selling and buying again

Often people can become focused on the sale price of a property and may forget to factor in the transaction costs of both buying and selling. When you consider, for example, stamp duty, legal fees, conveyancing fees, pest, building or strata reports, land tax, loan application fees, and moving costs, these can really add up. Does moving now make financial sense for you, or for example, could you stay put and renovate your home? 

The bigger picture

It’s easy to get caught up in short-term price rises and falls, but remembering how much your property has increased in value over the long-term may help alleviate some of the pressure of selling when the time is right for you. For example, you may have had your home for decades and quite possibly it has increased significantly in value during this time (despite ups and downs along the way). 

Also, as an aside, if you’re downsizing for retirement, and looking to release some of the equity in your home to provide you with some additional income in retirement, perhaps consider, if eligible and appropriate, topping up your super with a downsizer contribution. 

Ultimately, when it comes to selling property, there are often various things to  consider, and your personal circumstances, goals and plans for the future should always factor into any financial decision you make.