Should you sell now or wait for prices to rise?
Now that the market has turned and prices are on the rise, many home owners are torn between wanting to sell now and move on, or waiting for further price growth so that they can sell for more.
So what’s the answer? “Well, to start with,” says Berry Everitt, MD of the Chas Everitt International property group, “the decision to sell a property should never just be about trying to time things in order to get the highest price. Owners also need to think about the ‘opportunity costs’ of staying on in a home they no longer want or which no longer meets their needs.”
For example, he says, if they wait to sell until prices rise some more, the price of the next home they buy will probably also be higher, and they also run the risk of home loan rates rising in the meanwhile. “And in that case, they would most likely not only have to put any additional amount they made on their sale into the purchase of their new home, but also have to deal with higher monthly repayments than they had anticipated.”
In addition, if their reason for wanting to sell is to move to a home or area that would better suit their needs or those of their family, hanging on to get a better price will probably also mean giving up on the shorter commute, the better school, or the change of lifestyle they were hoping for, he notes.
“Of course, they might decide to pursue their goals anyway and just rent out their old house while waiting for prices to rise, but lenders might not be too keen on them carrying two home loans (even if the repayments on one are covered by the rent) and they will also need to consider the cost of maintaining two properties and paying two sets of rates and taxes.”
Writing in the Property Signposts newsletter, Everitt says those who are planning to sell need to take a view on how the real estate market is likely to behave in the next year or two, and that one of the major factors to consider is that rising prices are already helping many owners who have been stuck in a “negative equity” situation since the market crashed – and who are probably more than ready to put their homes on sale now.
“This will of course increase the supply of available homes – which has been dwindling in recent months – and that will slow down the growth in prices, even if demand stays at its current high level. New developments will further increase inventory and demand is also likely to show a decline when interest rates start to rise again.
“Overall then, the answer for those planning a move would seem to be that if you have equity in your existing home, you should sell sooner rather than later, and secure your new home at current prices and interest rates.”
Issued by Chas Everitt International