Happy New Year
After a very difficult 2010 not only for real estate but commerce in general, I am very optimistic that 2011 will see the growth in our properties that we have all been waiting for.
This expected growth has a dual edge to it and as with most things in life there are two sides to every story, ying & yang or good and bad. In this case it’s great when our home increases in value, which normally gives us more purchasing power or surplus cash flow.
This is definitely the case if you are a retiree and preparing for that circumnagivation of Australia or maybe you are just downsizing. That’s the plus side.
However, if you are selling and buying in the same market and like most people moving upwards or increasing the size of your home, it can be a costly exercise to wait for your current home to increase in value.
An example of this would be your current home could increase in value by 20% in the next 18 months. Say it’s worth $400,000 now – in 18 months it will be worth $480,000, that’s a capital growth of $80,000. Who can save $80,000 in 18 months??
Unfortunately, the next home you are looking to buy is traditionally 30% to 40% more expensive than your current home. An example of the downside to waiting to sell could be:
Your home is now worth $400,000 and in 18 months time it’s worth $480,000, the traditional move up in value is 30% (plus) which means you would be buying today @ $520,000. So, in 18 months time your $400,000 home is worth $480,000 but your new home which was $520,000 is now worth $624,000 !!. You are now $104,000 worse off. So you can see from this typical example it’s not worth the wait.
Always move up market at the bottom of the cycle or as soon as you can, don’t try and chase the market with the equity in your current home.
I hope this example helps to highlight the benefit of selling when the market is low and not falling into the trap of waiting until your home is worth more.
Real Estate is not rocket science, it’s common sense. It’s important not to get caught up in all the media hype. Real Estate always increases in value. In the past two years, it’s averaged around 6% to 7% per annum. Naturally, this can vary from district to district.
If you would like to discuss any aspect of the Real Estate market with me, please call me direct on 0414 306 040 or email me on firstname.lastname@example.org