25 Jan PROPERTY DOWNSIZING: BUY OR SELL FIRST? PART 1
THE FOUNDATIONS FOR DECISION-MAKING
You may be looking for an answer for that same question. Know that you’re not alone. While a definite answer hardly applies to everyone, knowing as much about the factors that lead to a sound decision is your best route. We’ll help you do that through this post.
Uncover and understand your risk tolerance
How far can you go amidst uncertainty? The property market is full of uncertainties, and your willingness to test the waters at any time determines the amount of risk you can take. If you’re a risk-taker, buying first may suit you well. If you’re cautious, selling first may save you.
The uncertainty hovering over the property market sheds light to the main element in your decision: money. It is true; most people will use the proceeds of their property’s sale to buy a new home. If you’re downsizing, you probably are looking forward to setting some of that amount aside for your other needs, too. What if you bought too early? What if you sold too late? A foresight into these questions reveal your tolerance for risk.
In the end, always remember that whether or not you intend to buy or to sell first, risk is functional. For one, the property market conditions affect property prices. So the final question is: how much are you willing to lose – or gain? Remember that risk always comes with a price.
Think about supply and demand
There are three things at play under this factor: your purpose for moving, the housing supply in your target area, and the housing demand in your current and in your target area. First, why do you plan to move? Why do you plan to downsize? Your answer to these questions will help you understand the urgency of decision making.
Second, what do you know about the current housing supply in your target location? If you’re downsizing to a retirement village, you may not need to worry about space. But if you’re moving to live closer to your family or to your dream home and/or dream location, knowledge of the supply market will help you decide. If supply is abundant, you can sell your home first. If the supply is short in your target location, you should buy first.
Third, the demand for housing in your current area determines how soon you can potentially sell your home. You can then sell and then buy or vice versa. The demand is there anyway. However, if the demand for houses in your target location is high, you should buy first. You have to make sure that the moment your house gets sold, you have somewhere to go.
Remember purpose, supply, and demand. These factors are interrelated when you make a decision whether to buy or to sell first. A home is a need, and you can’t afford to rent because it’s an addition to your expenses. Besides, moving is tiresome you want to do it only once then settle.
Learn from the property market cycle
The property market cycle is straightforward: there’s a time that the market will hit a slump, there’s a time when it begins to recover, and there’s a time when it booms. When it booms, the property market reaches its pinnacle and then will manifest signs of slowing down again.
The cycle above is influenced by the economic trends at the national level, but note that specific locations tend to be resilient from change. So what can you do? On one hand, if property prices are rising, it may denote high demand. You can buy a new property first because you may sell your current property in a short time.
On the other hand, if property prices are falling, it may denote high supply. You can put your property on the market first knowing that it may take a while before it gets sold. You can buy a new property later on; the prices are affordable anyhow.
At this point, you may already have a fair idea about what your next step will be. But before finalising your decision, you also need to be aware of the pros and cons of buying before selling and selling before buying. This is discussed in the second part of this article.