As the saying goes, the best time to buy real estate in Sydney was yesterday. Particularly for those who hold property long term, there is never really a bad time to buy great real estate. No matter the economy, state of world affairs, political upheaval, supply and demand fundamentals, confidence or interest rates. Time in the market forgives many errors.
That is not to say that there are no bad decisions or myriad mistakes people can make. But there’s no wrong time because over the long term, Sydney property has proved itself price resilient and more than able to ride out micro-market movements.
In fact, the biggest blunder some people make is getting out of the market all together. That’s especially true given the current price cycle.
I’ve come across a number of people who sold their homes last year because of the ‘signs’ that property markets were going to tank this year. Needless to say, they’re now living in regret.
In early 2020, so many property owners were reading online articles and blogs, skimming headlines or listening to armchair experts at socially distanced backyard barbeques.
They were told that things were about to take a nosedive. The economy was going to collapse like we’d never seen so it was time to cut and run. They were also being informed the rental market was set to take a hit. Tenants would be in the driver’s seat and investors would slash asking rents to ensure they avoided vacancies.
They decided to cash in on that growth and get out. They would buy back in once prices nosedived.
But of course, quite the opposite occurred.
None of the chaos and carnage eventuated. The economy kicked on, people got back to work as restrictions eased, pent-up property demand exploded, and house prices rose across the country.
And they’ve kept going up and up. And herein lies the big mistake that a lot of property owners make when they sell and then delay buying in again.
Anyone who offloaded their home in the middle of last year is now looking at a Sydney market with a median price around eight per cent higher than when they sold. In fact, Sydney’s median house price has risen $100,000 since the start of the year (Source: CoreLogic).
It’s a market where auction clearance rates are consistently above 80 per cent each weekend, with a frenzied pace I haven’t seen before in my career. Competition is extremely tight, making it an arduous task for those trying to find their next home.And so, those who sold last year either in a bid to cash in on the pandemic-induced lift in prices, or to avoid this talk of a price apocalypse, effectively speculated on their most important asset. It’s like putting your life savings on black at the casino and hoping for the best!
The cost of having exited the market, even for a period as brief as eight short months, has been enormous and far reaching.
It’s financial – tens of thousands more to pay, potentially six figures-plus.
It’s also emotional. The time, effort and stress of securing a home in this white hot market is challenging.
So instead of choosing to sell and wait, their decision should have been, “What will I buy to replace what I’ve sold?”
Selling then buying in the same market reduces the risks of financial loss and the opportunity cost of missed capital gains.
What’s most surprising is history has showed us time and again that those who sell and sit out a market in hopes of price retraction always get it wrong.
Just take a look at the remarkable resilience of the Sydney property market in years past.
In mid-2017, a price correction was sparked by a multitude of factors around banking regulation, foreign buyer restrictions and oversupply. It looked like the golden years of capital gains were at an end.
But three-and-a-half years later, Sydney’s median dwelling price has surpassed the previous record high. It’s the same result as after the 2003 boom.
So, don’t get caught out – play the long game. Make sure you plan properly for your future and never opt out entirely from Sydney property.