Should you buy, hold or sell Sydney real estate?

 

What is on most property owner’s mind is should I “buy, hold or sell Sydney real estate”? We have recently returned from the Property Buyer Expo and we wanted to share some important information that may assist with your decision.

 

Firstly please understand that there are a number of factors that determine the performance of a property market. Some of the main factors are outlined below.

1. The general economy

2. Local economic conditions / facilities in a local area

3. Population growth / net migration numbers

4. Existing or planned infrastructure

5. Interest rates / lending environment

6. Government in office / policies

7. Supply and demand for housing

 

Buying

  • The majority of buyers at the moment are owner occupiers, made up of: 1st home buyers, buyers that are looking to purchase a bigger property and also buyers that are looking to purchase a smaller property.
  • The buyers that are active in the market have been waiting for prices to adjust so they can purchase a property. An owner occupier buyer is likely to pay more for a property than an investor.
  • A buyer that is looking to purchase a bigger property is viewing this market as an great opportunity to move up, as there is less competition from other buyers and the gap between the next level property is smaller now in comparison to what the gap has been over the last couple of years.
  • A buyer that is looking to downsize may have sold their property recently and is in a cash position to buy a smaller property. These buyers are normally baby boomers that want to have a better lifestyle, reduce debt or help out their children.
  • An investor that is buying property at the moment is viewing this market as a good opportunity to buy at current price levels and are taking a long term view on the property market. However, Sydney property is generally only showing gross returns of between 3-5%.  

 

Holding

  • Owner occupiers that are deciding to hold property at the moment are taking a long term view on the market and have no immediate plans to move. They are happy with their current situation and aren’t getting caught up in the media hype about the property market.
  • These owner occupiers could own a unique property or currently meets all of their needs and would be hard to replace.
  • These owner occupiers also realise the high costs of buying and selling property. If you decide to sell your property then you may need to prepare the property for sale, invest in marketing, solicitors costs, agents fee’s and moving costs. You will also need to determine if any capital gains tax will be payable. After you have sold it will take time to find another suitable property. When you buy you may have to make improvements to the property as well as having to pay stamp duty. So as you can see the costs can be high and require a lot of time and effort to buy and sell.
  • The investors that are holding property at the moment are likely taking a longer term view on the property market and or capital growth. They may be focused on creating wealth and or generating cash flow. They are likely to be adopting the buy and hold strategy for their investment property. Again like an owner occupier the investor realises the costs of buying and selling real estate are high and they may be better off to refinance and use the equity to buy another property.
  • It is expected that the Sydney property market is unlikely to grow and that prices will be flat for a while. Prices could come back further.

Selling

  • The majority of owner occupiers that are selling properties at the moment are doing so to buy a bigger property or they are selling to purchase a smaller property. Some of these owner occupiers are choosing to sell first so they know exactly how much money they have to purchase the next property and don’t want to get caught out with a shortfall. This option is a safer option and a preferred option when prices are stable or declining. The other option is to wait to find a suitable property before they sell. These owner occupiers are generally in financial position where they have enough money/equity or have a back up plan in place to cover any shortfalls in price. This option is preferred if the property you are looking for is very specific to your needs and the supply of this type of property is low or when prices are rising.
  • Ultimately there are less buyers in the market than the previous 12 months. This has been a result of APRA and the Royal Commission’s intervention. An owner occupier buyer is likely to pay more for a property than an investor.
  • A seller needs to be prepared that selling a property will take longer in this market and also it’s important to set a backup plan for delays in time or if the price achieved is less than your expectations.
  • Another reason for selling properties is that you may have an interest only loan that has expired or due to expire soon and your loan may have to go to a principal plus interest loan and you can’t afford it or you have other financial commitments. Click here –> READ MORE
  • Selecting the wrong agent to sell you property in this market could cost you thousands of dollars. Click here –> READ MORE 
  • The investors that are selling properties at the moment are generally reducing debt or helping their children. Another strategy undertaken by investors is that they are taking advantage of the strong capital growth their property has enjoyed in the past and they are cashing out and understand that the Sydney market is likely to be flat for a while and are looking to purchase in another area or state which will perform much better than Sydney.

Note: Our information is general in nature and recommend that you speak with your accountant and or financial adviser to discuss your own personal situation.

If you have any questions or would like to discuss your situation please contact us on 1300 258 888 or on the links below.

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