Over the past 6+ months we have all been hearing the (inevitable) negativity around property prices and the fast decline most markets have experienced.
Markets are cyclical, hence why investing in anything should have short, medium and long-term outlooks. However, there is one piece of the market that this down turn is good news for…
UPSIZERS!!! For those who are mid-way through their “stepping stone” purchases of property to that dream forever home. If you have good financials, and potentially a candidate for a new mortgage application (given the new tighter lending requirements) this may be a consideration for you.
Why?? Well lets explore this further because “isn’t it a terrible time to buy??” … actually may be quite the contrary for many…
A lot of investors fail due to too much speculation instead of working with known outcomes. So, what do we and don’t we know?
What we do know:
What we don’t know:
We don’t know if property prices will continue to fall over the next 12 to 18 months
Unknown but likely assumptions:
A safe assumption is that these properties will almost certainly be more expensive than they are now in 10 – 15 years’ time and even that of where they peaked recently
This brings us to the “upsizing arbitrage” and why you may want to consider it.
Falling property prices scare a lot of people who are currently in the market mostly due to outside commentary. However, the savvy home owner can take serious advantage of this.
If your dream property 6 months ago was worth $1,500,000 and your home was worth $750,000 and the market fell by an average 10% your current home value has fallen by $75,000 while your dream home has fallen by $150,000…
We don’t buy in percentages, we buy in dollars!!
So, in a world where everyone gets caught up in percentages, we tend to forget that when purchasing and selling, the dollar figure is really the only thing that matters and, in this case, we can see a saving of $75,000 on purchase price, around $30,000 less needed for the same 20% deposit, as well as around $8,000 less for Stamp Duty.
That difference in the total term of the loan (assume worst case 30 years at 4% interest rate) could be the difference of around $250,000 in the total purchase price and repayments of the same property.
Add in some nifty negotiations in a buyers’ market and this arbitrage can really be a game changer!!
Selling in a falling market is rarely an ideal scenario. However, as we can see from above, for those in the market for upsizing, it can definitely be a worthwhile exercise to explore.
Myself and the team at Announcer Group are happy to talk you through this if this is something you would like to explore.If you need anything at all please do not hesitate to call myself on 0400 110 744 or use the links below to directly book yourself in to my calendar!