3 reasons you shouldn’t sell, even as Brisbane home prices soar
Property people are beside themselves with excitement right now. It’s been a long time since Brisbane home prices rose as rapidly and no doubt your inbox is full of agents urging you to act quickly as “Australia’s housing market is now well entrenched in one of the strongest growth phases on record.”
The latest stats showed Brisbane dwellings rose 1.5% in February alone and across the nation we saw the highest month-on-month rise since August 2013. Core Logic’s Director of Research, Tim Lawless (quoted above), believes the mismatch between supply and demand is a central factor pushing prices higher. “Housing inventory is around record lows for this time of the year and buyer demand is well above average.”
So why wouldn’t you sell in this under-supplied market with buyers competing strongly?
1. You’re planning to downsize. There’s no question a busier market means less time up for sale, less open homes, less inspections and usually far less stress than what a seller experiences in quieter times. But the simple math is this: If your $900,000 home rises 20% (Westpac’s estimated jump for Brisbane homes by end of 2022), your new $500,000 apartment will be more affordable, even after its 20% rise. Waiting 22 months might save you $80,000 in this example.
The reverse applies of course: Upgrading is far better done in a low market and before prices really ramp up. If you’re on the other side of this move then a 20% rise will cost you an extra $80,000.
2. You’re not sure what to do with the money! What happens once you sell? We know many landlords who’ve been waiting for the “right time” to sell off a property that hasn’t been great to own. Either a poor income producer or one that’s expensive to maintain. Many have simply decided property investment is just not for them. But if your property’s value will rise strongly in the next year or two, where could the money work harder for you?
Are experts making the same forecasts for the share market? Could you see double digit growth in managed funds or other non-property assets?
Finally, with this current surge in prices, many properties purchased in the last decade are now ahead of their entry price. But depending on the personal financial advice you receive, it still might not be your right time to sell if you think property will definitely be the outperformer in coming months or years.
3. You think the price rises are just getting started. We all want to cash in our investments at the top of the market. Momentum is certainly building and affordable finance and buyer confidence are feeding price changes that we haven’t seen since the early 2000’s. If interstate migration follows recent trends and our city enters a new golden era – think Olympics 2032 as the next Expo 88 – with a seismic shift upwards in employment opportunities, then Brisbane home prices really could be on the cusp of something exciting for investors. A repeat of early 2000’s maybe, when we had multiple years of 15% plus price growth (2003 alone saw Brisbane home prices soar 32%).
We’re cautious about many ‘expert’ opinions however, and it seems laughable to us to produce a specific percentage that our home prices could be expected to grow. What if developers release large quantities of new apartments across the inner-city (they have their fingers on the construction button with thousands of approvals already in place)? What if the end of the current home loan deferrals lead to defaults on mortgages? SQM research’s Louis Christopher says, “The big test is to come when JobKeeper ends at the end of this month.”
Could we again experience the neck-breaking change of 2007/2008 where a very sharp 23% annual rise was followed by a rapid turnaround, and Brisbane’s home prices dropped almost 7%. Predicting property’s future is a tricky and potentially expensive game for any of us!
Please share your opinions in the comments below.
NB: Please seek professional financial advice and don’t rely on real estate agents and ‘market experts’ when you’re planning your investment decisions.