The property market downturn has gone national in Australia and if you only read the headlines, you would assume that the sky is falling. But for one type of buyer these conditions might just be perfect: upsizers.
The higher end of the market is dropping in value faster than any other segment meaning upsizers are in an advantageous selling and buying position.
Think about it like this. If you’re in a townhouse or apartment and you’re looking to upgrade to a bigger house, you’re able to sell for a good price and buy at a softer price.
The numbers are in their favour too. Cotality’s Home Value Index show upper quartile values nationally fell 3.2% over the three months to July, while lower priced housing edged higher.
Domain’s House Price Report has indicated that this is especially true in Sydney and Melbourne where market values have fallen 3.3% and 3.1% respectively. Even Canberra has reported a 2.5% drop over the June quarter.
The cost of upgrading is shrinking right now and upsizers are the quiet winners of a softer property market.
Sellers haven’t adapted to the market quickly, giving buyers more bargaining power. Sydney’s auction clearance rate has fallen to 48%, its lowest level since April 2020, and homes are taking longer to sell with deeper discounting.
However, that doesn’t mean that upsizers should sell without a plan.
Treat the selling and buying as a single purchase. The home they are purchasing is worth more than the property they are selling. The cheaper home is also falling value, but the more expensive one is seeing a larger drop in dollar terms. So if you sell a $1 million apartment to buy a $2 million house and the value of the apartment falls 2% and the house 5%. The apartment has lost $20,000 while the house dropped $100,000. The gap between the two has narrowed by $80,000.
Upsizers haven’t made money in this situation. What has changed is the cost of bridging the gap which is the number that matters most when trading up. Stamp duty is also calculated on the purchase price, so a softer price usually trims that cost too.
Keep in mind that this is only the case if what you are selling is a part of the market holding up better than what you are buying. Reverse that and the sums move against you.
A lot of buyers are waiting for the bottom of the market to present itself because they think it’s the perfect time to buy. In theory, that’s true. The problem is that it’s impossible to guess when the bottom has been reached. If you are ready to move, waiting could cost you if market conditions improve.
If you’re considering upsizing, speak to the team at It’s Simple to discuss your options. No commitment, no jargon, just simple guidance.
This article contains general information only and does not take into account your objectives, financial situation or needs. Property values can fall as well as rise and past movements are not an indicator of future performance. It’s Simple is a mortgage broker, not a lender. Consider whether this information is appropriate for you and seek professional advice before acting.