The Reserve Bank of Australia (RBA) today announced it will keep the cash rate on hold. This follows three cuts this year, with the cash rate currently sitting at 3.60%.
Homeowners with a variable rate will have found their interest rate is now lower than at the start of the year, and people looking to buy likely have found their borrowing capacity has increased. This means there is generally more money available to people making offers on properties – but this could have been adding more fuel to the property market.
If you’re looking to move, you are likely wondering whether you should buy or sell first. The answer depends on your situation and the area you are buying or selling in. Firstly, let’s take a look at what is happening in the property market throughout the country.
Listings are down, competition is up
Ray White data shows listings in July were down 11% in the major cities compared to the same time last year. Regional area listings were down 17%. Month on month, we are seeing an increase in new listings, with SQM data showing a 14.4% increase in August as we approached spring selling season. Hopefully, for buyers, this trend continues to reduce the competition on limited stock.
At the same time, the federal government announced changed eligibility requirements for the Home Guarantee Scheme, enabling more first-home buyers to purchase with a 5% deposit. It is widely expected this will further drive competition in the market and drive prices up – particularly within the property price caps of the scheme.
The time properties are on market varies depending on the area. According to Ray White data, it ranged from 13 days (in Perth) and 21 days (in Brisbane) up to 54 days (in Darwin).
Buying first vs selling first
When weighing up whether to buy or sell first, you can consider some of the pros and cons.
Buying your new home first
The pros:
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- Less pressure to find a new home: You can take your time to find the perfect property without the stress of time between homes.
- Smooth transition: You can move straight from your old home to your new one, avoiding temporary accommodation or storage costs.
- Negotiating power: You might have more room to negotiate on your new purchase if you are not in a rush to buy.
- Opportunity for renovations: Having time between buying your new home and selling can give you an opportunity to complete any improvements or stage the home to optimise the selling price.
The cons:
- Financial strain: Depending on the lender, you could be paying two mortgages at once for a period, which can be a significant financial burden.
- Timeline risk: If your old home takes longer to sell than expected, you could be stuck paying higher interest for an extended period. This could lead to feeling pressure to sell your home quickly, potentially at a lower price than you wanted.
- Reliance on market conditions: You are hoping your existing property sells for the price you want within your desired timeframe.
Selling your existing property first
The pros:
- Financial certainty: You know exactly how much money you have from the sale of your old home, which helps with budgeting for your new purchase.
- Stronger buying position: You can make non conditional offers on new properties, which can be very attractive to sellers.
- Reduced financial stress: You avoid the worry of having two mortgages.
The cons:
- Temporary accommodation: You might need to find a rental property or stay with family while you search for your new home.
- Time pressure: You may feel rushed to find a new property once your old one sells.
- Market fluctuations: If house prices rise quickly, the money you get from your sale might not go as far as you hoped for your next purchase.
Bridging loans
If you do decide to buy before you sell, one way to do that is by using a bridging loan. A bridging loan is a short-term loan designed to help you ‘bridge’ the gap between buying a new property and selling your existing one. It provides you with funds to purchase your new home before you have received the proceeds from the sale of your current property.
Think of it as a temporary financial solution that offers flexibility during a property transaction. You can find out more about bridging loans with our free guide.
