You’ve got to know when to hold ’em
Many people wanting to move are torn over whether to sell their home now or wait. Miriam Bell reports.
New Zealand’s housing market downturn has left many homeowners who want to move facing a dilemma over whether to sell their home now or wait, but experts say the decision depends on circumstances.
Over recent years, the market has been on a rollercoaster ride as prices skyrocketed then plummeted.
The national median price hit a record high of $925,000 in November 2021, according to Real Estate Institute figures. Since then, the institute’s index shows they have fallen by more than 13%.
With interest rates still rising, and the threat of a recession on the horizon, economists believe that prices have further to fall this year. But they also say rates may be close to peaking, and the rate of price decline is slowing.
That has left many homeowners asking whether it is better to hold on and hope the market improves before selling, to sell now and avoid further price falls, or to rent out their place and rent somewhere themselves.
Four experts weigh in on the best approach.
Getting the timing of selling and buying can be tricky to line up, so sometimes renting in between is necessary.
Nadine Higgins, above
Brad Olsen, Infometrics principal economist
Olsen says a lot of people may want to move but do not have to sell right away, and those people will just wait the downturn out.
But it is different if someone has to move for say, a new job in another city. In that situation, it might be better to sell now because of uncertainties if they hold, he says.
‘‘It is not just how much further prices might fall though, it is also about the length of sale time. At the moment, there is a median of 40 days to sell.
‘‘If you want to buy another house, especially in a different city, that is a consideration, especially as a lot of sales are conditional on the sale of the buyer’s house.’’
Another consideration is that tighter servicing criteria and higher rates in a year’s time could mean the ‘‘mover’’ may not be able to get the finance they need further down the track, he says. ‘‘Someone may not want to sell their home because they are not sure of the permanence of a move for a job, for example, so renting it out instead could be an option for a homeowner who can afford to do it.
But given mortgage rate increases, and the fact the property would qualify as a rental, which means interest deductibility rules will apply, it is not a good, long-term solution for most, Olsen says.
Nadine Higgins, Enable.me financial adviser
Higgins understands people are worried about the state of the housing market, but says that if they are moving, they need to remember they are buying and selling in the same market.
While someone could hold on and see if the property market improves, that is likely to impact the price of the property they are buying as well as the one they are selling, she says.
‘‘But if someone is doing it to try to time the market, it’s a risky manoeuvre, as they need to be sure that the bank’s willingness to lend to them won’t drop in the meantime.
‘‘They might find that while the house price drops, so does their ability to borrow. As interest rates rise, banks’ test rates rise, too. They’re currently sitting in the mid-8% range, so it
becomes a bigger hurdle to clear.’’
Buying at the bottom of the market is often when it is hardest to borrow money, so unless someone is paying in cash, they need to factor in lending criteria, she says.
‘‘If someone is selling and buying a home, the best time is generally predicated by their personal financial situation.
‘‘So they need to think about whether they can afford higher repayments due to more debt and higher interest rates, whether they are taking on more debt than they can handle, and if they can afford to make progress as well as pay the mortgage.’’
Higgins says that getting the timing of selling and buying can be tricky to line up, so sometimes renting in between is necessary.
Liz Koh, Enrich Retirement financial coach
For Koh, the decision on selling now or later should come down to personal circumstances, as well as location and type of property involved.
It is really all about the reason someone wants to move and job, lifestyle, and relationship changes often come into it, she says.
‘‘Those considerations should have more weight in the decision-making process than
fluctuations in house prices. But if the move is because of a relationship breakdown, it is probably better to bite the bullet, sell, and move on, rather than hang around to try to get a bit more money.’’
It is worth remembering that some properties, such as ones with leaky home issues, or monolithic cladding, are often tricky to sell, and are much harder to move in a downturn, she says. ‘‘Location comes into play too.’’
Prices are generally lower in smaller towns so if someone wants to move from a smaller town to a bigger city, they are likely to sell for a lower price than in the city, and then have to pay more for a similar type of property once there.
‘‘It does go the other way too though, and if someone is moving from a city to a smaller town, they might get a high sale price in the city, and then be able to buy more with their money in the smaller town.’’
There is always a lot of regional variation, and anyone weighing up a move needs to take into account what is happening in different markets.
Tony Alexander, independent economist
Alexander says if people are buying and selling in the same market it should not make much difference whether they sell now or wait – unless they are a gambler and focused on capital gains.
‘‘Some people who want to move may be wondering if they can make a profit by selling at a good price and buying at a lower price. If that is their focus, they are trying to time the market, and just have to take a risk based on that.
‘‘No-one has the ability to predict over a year what the market will do. We see the same tendency to try to time the market with other assets too, be they gold or cryptocurrency.’’
But, as with other assets, house prices move up and down. It is not possible to accurately pick when they are going to bottom out, or unexpectedly shoot up, he says.
‘‘Someone trying to do that in the New Zealand housing market is taking a risk, given the surprises we have seen in recent years.
‘‘They should just concentrate on getting on with their life and work, choose when to sell based on those factors, and take whatever comes in terms of prices.’’
But for most people, it will be about moving from the family home, so the decision-making should simply be about what is best for their family, and lifestyle, he says.