Deciding whether to sell your current home or buy a new home first is the eternal real estate question. It’s similar to which came first, the chicken or the egg? There is no defining answer. When it comes to property, your best bet is to be as strategic as possible.
It is a stressful time when it comes to selling your biggest asset and moving to new pastures. For any move on the property ladder, whether upsizing or downsizing, the aim is for the process to be smooth.
In a perfect world, the buying and selling aspects would be as close together as possible. But, like anything, the perfect scenario is hard to create.
Ultimately, it depends on whether it is a buyer’s or seller’s market. Ideally the two transactions would occur in the same property cycle.
Rewind a couple of years. In the June quarter of 2015, Sydney’s median house price gained 8.4 per cent, according to Domain data. Since then, the level of growth has slowed, increasing 1.6 per cent in the June quarter of 2017.
This highlights the importance of understanding the market before embarking on your property journey.
In a market swayed towards the buyer, selling your home first is advisable. With no immediate urgency to sell, it can mean you are able to hold out for the best price achievable. Selling first means you know your buying budget for your next home.
You want to avoid forking out interest payments on two loans. It could see the equity you have built start to dwindle. If you do find your dream home before selling, consider leasing one of the homes. Related: Buyer’s agent a major advantageRelated: Considering buying off the plan? Related: Should your home have sold already?
These two words can often horrify homeowners: bridging finance. If you buy before selling, bridging finance can cover the period in which you own two homes. This type of finance can help in a sticky situation, but can be costly and is only for the short term. For some, bridging finance brings far too much stress.
In a seller’s market, it is assumed you should be able to quickly sell, as properties tend to move off the market quickly. Under this market dynamic, buying a home first should be less risky. When, and for how much your home will sell is an unknown. It may place unnecessary pressure on you to accept the first offer without maximising the price.
Whether it is a buyer’s or seller’s market, consider opting for a longer settlement, either for your current home or your new purchase, to allow time to find a new home or sell the old one. Make a choice that suits your personal situation so that the process can be as stress-free as possible.
Dr Nicola Powell is a data scientist at Domain Group. Tweet your questions to @DocNicolaPowell.