What approach should you take in 2018 with the changing market?
People are quick to give real estate advice, but at the end of the day, it needs to be put into perspective. What is right for one person, might not be right for you.
People have different thoughts around our current position in the property cycle, but most people agree that we are nearing the “top”. So, if you have been thinking about selling and want to time it well, the next 12 months (and maybe right now) could be the right time to sell.
Landlord responsibility will affect cashflow. With new rules coming into effect, and with outside influences changing the risks of property investment, will make a difference to the cashflow position in the coming years. Meth contamination, Rental WOF, Tenant’s rights under the Tenancy Act, etc. are all a part of the overall mix that affect the return on investment. Many investors and columnists talk and write about these extra costs being covered by the tenant through higher rents, but I don’t believe that to be realistic. The cost of housing in NZ is very high and there is not a lot of room for further increases without serious social issues arising.
If you want to stay in the property market and you have a property that is not up to date with the current standard, this might be the time to consider selling and reinvesting in a low-maintenance and more modern property.
The Bright Line Test will increase from two to five years within the next month or so. This isn’t a huge problem for most investors as the majority of investors have the intention to hold onto property for a longer period of time and typically are working towards a retirement fund. But if you are an investor who actively buys and sells property, the new timeframe might make a difference.
Many people want to know whether to buy or sell first. It’s not an easy question to answer as there are many things to consider. So, let’s have a quick look at the options:
Buy first – then sell. This is a good option if you have all your ducks in a row and are well prepared. It is important to be organised and know with certainty what you will likely be able to sell your property for and in what timeframe. Finally, what will happen if it doesn’t quite work out – i.e. do you have a plan B?
Sell first – then buy. The risk with this is that in a rising market with limited properties available, you might not be able to find the right property soon after selling. This could have a huge impact on your financial position and create stress:
- You might end up moving twice
- If you buy a year after selling, you will have to pay a higher price for the property and would have sold in a market where property prices were less, moving you backwards from a purely financial perspective
- You might end up buying something that is not quite right for you “just to get back into the market”.
- Or you might be lucky and find the perfect place shortly after selling ☺
As we are moving into a different market, there will be more opportunities coming up where you can buy a property subject to yours selling. This is the ideal situation for homeowners looking to move. We are seeing an increase in contracts “subject to a house sale”, but it will take another 12 months or more before this will generally be acceptable to sellers. There are simply too many buyers with cash in their pockets who are looking to purchase now.
There’s no perfect solution that suits everyone but we can help. By predicting what is likely going to happen we can find out what the best solution is for you based on your personal situation and depending on the level of risk you are comfortable with.
Give me a call if you’d like to find out what might work best for you.