Should you buy first then sell or sell first then buy? This is an age-old question most vendors face. Unfortunately, the answer isn’t always simple as there are many factors to consider.
First things first, the decision to buy and then sell and vice versa should consider the current market. As a rule of thumb, property professionals tend to advise to sell first in a buyers market and buy first in a sellers market which is what we are currently experience.
When demand outstrips supply, buyer competition is tough, houses sell quickly and vendors that wait to buy can be left without somewhere to live as well as the associated costs involved. This is evident in the current sellers market, where we are experiencing low days on the market and above average clearance rates which combined with other factors are causing stock shortages across Australia.
Australia is also experiencing a shortage of rental properties, particularly in regional areas. The national rental vacancy rate was just 1.6 percent at the end of October 2021. This number dropped to less than 1 percent in regional areas like rural Queensland.
To add another layer of complexity, house prices across the country have risen 22.2 percent over the past 14 months. Taking all these factors into account, vendors that choose to wait to buy in a sellers market run the ricks of not only being displaced for an interim period but potentially being locked out of the market due to increasing housing prices.
There are of course negatives to buying before selling. Most of which involve finances. For example, those that choose to buy before they sell are typically subjected to double mortgage, tax, insurance, and utility payments as well as other expenses.
Accordingly, the advice is to buy first in a sellers market to avoid being displaced or locked out of the market. Buying first is also considered to be a good idea for renovators or downsizers for the apparent reason that holding onto a property provides a comfortable home base while work is completed.
The reverse, selling before buying is favoured in a buyers market, where moving options are plenty and finances are more straightforward. This scenario also helps vendors gain more of a complete idea of their budget moving forward.
As you’ve just read, there are pros and cons to both options, however as the real estate industry rapidly evolves, clever strategies are being adopted to make the market work better for vested parties.
Historically, settlements typically span a six-week timeframe, however many clients are now asking for extended settlement periods of three to six months. Leaseback arrangements are becoming more and more commonplace as well. Providing the seller with increased flexibility to find a new property and the buyers with an income to cover the new mortgage while they do so.
Creative strategies like sunset clauses and contemporaneous settlement clauses are also being put in place to provide conditional parameters around settlements that help move parties from one property to another in the lease disruptive way possible.
When working out which option to choose, it is essential to key a watchful eye on the market. Obtain a thorough understanding of your financial situation and enlist a trusted real estate agent to develop a plan of action that works best for your circumstances.
