Upgrading To A Bigger, Better Home

Jo Mooney, Real Estate Professional

There’s a LOT of uncertainty around the real estate market in Melbourne at the moment.

After the covid19 pandemic and ensuing financial turmoil it has brought to the market, home owners don’t know whether to sell, or wait and see what happens.

And buyers are salivating at the possibility of big price drops (if the market drops) to make it easier for them to get their next home!

However, the BIG crystal ball question ultimately is:

Will the market rise, stay steady or fall in 2020 and beyond?

And, regardless of which of these three options, how can you best position yourself to take advantage of the trends in the market?

Now, in truth, none of us know 100% for sure which of the above 3 options are going to happen in the next 6 – 12 months, but there are some hints that seem to indicate what might happen, and this article will explain what I think is going to happen, based on these hints & how you can take advantage of this to upgrade to a bigger, better, higher value home.

The #1 thing to keep in mind is that when markets shift, there are always winners & losers.

If home prices rise, home owners selling make more money and home buyers have to pay more money.

If home prices drop, then home buyers reap the reward with a lower purchase price and home sellers either can’t sell (due to the price they want for their home being too high for the market) OR they make less money.

Neither of these options are rocket science!

It’s simple supply and demand and we are ALL impacted by this.

Real Estate – It’s ALL about Supply & Demand

Just think back to the crazy toilet paper scare earlier this year! With low stock, prices (and demand) went way up, and now that stock levels are back to normal, prices have dropped and demand has also dropped.

No more fights in the supermarket aisle for a pack of toilet paper! 🙂

So, whether the real estate market in Melbourne goes up (in which case, you can sell and make more money) or goes down (in which case you’ll lose money, assuming you can even sell), you can come out ahead if you play your cards right.

Now, one really important thing to keep an eye on is what the experts are predicting will happen. While they may not be 100% right every time, they tend to be much more accurate in their predictions simply because they have access to much more data and expertise than the average man or woman on the street.

One such organisation I keep an eye on is Herron Todd White.

If you’ve never heard of them before, they’re one of the largest independent property valuation and advisory groups in Australia.

Since their first office opened in 1968 in Rockhampton (QLD), they have expanded to include more than 800 staff across 64 offices throughout Australia.

And in 2014, they made the Australian IBISWorld list of Australia’s Top 500 companies & were voted #1 Valuation Advisor in Australia by Euromoney Real Estate Awards (2016).

In other words, they’re EXPERTS at property valuation and understanding the real estate market as a whole.

Every month, they release their free monthly property report, the Month in Review – which identifies the latest movements and trends for property markets across Australia.

Their report is very valuable for anyone buying or selling property.

I always read their monthly report and look at their “National Property Clock” to see what they say about the Melbourne real estate market.

National Property Clock (Herron Todd White)

Their June 2020 National Property Clock showed a BIG change in what they had predicted for the previous months going back to Feb and earlier.

Melbourne has been rated at “Start of Recovery” from Feb 2020 to May 2020, and then in June 2020, they jumped up 2 levels to “Approaching Peak of Market”!

This BIG jump in literally one month also saw a heap of other major population centres follow it.

In fact, 39 locations out of 48 across all of Australia changed position in June!

They’re the black/gray coloured text in the below image, and the orange text is all the locations that DID change in 1 month!

June 2020 National Property Clock

That might not sound like a big deal, but if you look at the figures since Feb, this is a MASSIVE upheaval.

In Feb 2020, only 9 locations out of 48 changed position.
In Mar 2020, only 9 locations out of 48 changed position.
And in May, 17 locations out of 48 changed position. (due to the overall effects of covid19 in the market)

(there was no report in April, most likely due to the covid19 lockdowns)

So in June, things went a little (a lot?) crazy, according to Herron Todd White, and one of the warning signs or hints (as mentioned earlier) to come out of this is the following paragraph in their June report:

“The concern is what will happen later in the year when government stimulus and mortgage pauses end.There potentially could be a significant increase in new listings, some under distressed circumstances, which could have a large impact on prices heading into 2021.”

Now up until this point, this article has mostly been an intellectual exercise in the effects of supply & demand on real estate market prices, but NOW we get to the really important part of the whole situation for YOU.

If you’re planning to sell your home this year or even next year, this is likely to be an important factor for you in deciding whether to sell now or hold off and see what happens.

If you wait and the market drops fast &/or early, then you’ll lose money.

If you sell now and the market doesn’t drop, then you’re probably not going to be adversely affected either way.

However, if you are looking to upgrade to a bigger and/or better home, then ideally you want the market to drop when you’re ready to buy so that you get a lower price.

If you’re able to sell your home at or near the current peak, and then wait a little while (perhaps rent while you wait?), you should be able to take advantage of any market drops that may occur due to the end of government stimulus packages (like JobKeeper/JobSeeker) and also the end of bank pauses on mortgage payments.

Given what I see coming in the next few months in the market, I believe that NOW is the best time to sell, because it looks highly likely home prices will start dropping soon, once all the financial support for mortgage holders dries up!

Just to be clear, it’s not the bragging rights about what price you got for your home that is important, but rather, it’s all about the changeover cost between your current home & the new bigger, better home you will be able to buy at a reduced price in the future.

Essentially it’s like buying a new car. You’re trading in your smaller home for a bigger better model, and you only pay the changeover price, not the full price.

Also, something to take into consideration is if you are in secure employment, then you’ll have less competition for the bigger better homes (due to the difficulty some people will have getting finance) which will make it easier to get a lower price.

Another big advantage to consider is interest rates. They’re currently extremely low – historically low – and they will be staying that way while the economy rebuilds.

This reduces the cost of the finance you’ll need to trade up into a bigger better home!

And lastly, the equity on your new home will increase significantly as the economy regrows over the years.

So if you are interested in looking further into this option and would like to have a confidential chat about whether this is right for you, then fill in your name & contact information below and I’ll call you back to discuss your situation.

Please note 2 things:

  • There is no obligation to go any further if you book a call with me. This is purely an exploratory call to find out more about you & your situation. You are allowed to say no to any offer I may make to help you with selling your current home & finding a new one.
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  • Be aware that if I don’t believe this option would be suitable for you, I will not recommend you go ahead with it. Not everyone will qualify for this kind of option and I will tell you this as soon as I can if I feel it’s not right for you. I’m not interested in pushing people into something that isn’t appropriate for their needs, wants & circumstances.

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