Should I Stay or Should I Go? … sell, buy, invest or wait – what should I do?

The property market is always changing.

Property prices fell 17.8% from the peak of the market in November 2021 to the bottom of the market in May 2023.

That’s the largest fall we’ve recorded since records began back in 1992.

In the last few months the property market has been up and down … and then sideways.

Naturally, people are going to have a lot of questions: Should I sell? Should I wait? Should I buy? Or … Should I invest?

Here at Opes Partners, we are a property investment company. The hints in the name; we help people invest. So there is an incentive for me to say: “Invest in property. Buy now!”

But I’m not going to do that.

So, in this article I’m going to answer this question as honestly as possible, then take a step back and let you decide whether to sell, buy, invest or wait. That way you can make the right decision for you.

So let’s go through four situation to see who should sell, buy, invest or wait.

Scenario #1 – Should I sell?

Property prices are down right now, so it could be a good idea to sell if you want to upgrade your home.

Sandra and Dave own their own home. They want to upgrade their tired, 1970’s house to buy a nicer one. But they’re not sure if they want to sell now or in a year.

Many people say that it doesn’t matter whether you do it now or in a year. After all, you’ll be buying or selling in the same market.

But, I reckon that in Sandra and Dave’s case it probably is a good idea to sell now.

Generally, if you’re buying a better, more expensive house, do it when prices are down.

Why’s that?

If you are selling your $1 million house to buy a $1.5 million house, then the upgrade costs $500k, ignoring real estate agent fees to keep the numbers simple.

But, what happens if you wait and house prices go up 10%? Sure, you can now sell your property for $1.1 million. But, the $1.5 million house you want to buy now costs $1.65 million.

So it now costs you $550k to upgrade your house, rather than the $500k it costs today.

But the opposite is also true. So if you are a retiree and want to downsize, it’s a different story. Then, it’s best to upgrade when house prices are higher.

Scenario #2 – Should I wait?

The bottom of the market is usually a good sign to buy now to get a good deal.

Unless, of course, you’re a seller and want to get a premium price.

I was on the phone talking to Jo, an investor in Bucklands Beach, Auckland. He’s seeing a lot of townhouses going up around him and he’s thinking: “Should I sell my property to a developer to build some townhouses on?”

In Jo’s case I recommended he hold onto that property for a bit longer.

Why? Property prices have only just recently bottomed out and will soon recover. If he sells now he’s probably selling near the bottom of the market.

If Jo can hold onto it for a couple of years, I’d expect house prices to increase and he may get a better price.

On top of that, his target market is a developer rather than another homeowner.

I know from working in the industry that consents are quite low. Developers aren’t purchasing a lot of land at the moment.

So if he waits for the development market to recover he will likely get a good price.

The other reason for this is that Jo doesn’t have to sell. His aim is to get a premium price off a developer. To achieve this, his best bet is to wait till the market recovers.

Scenario #3 – Should I buy?

Emily is in a good position to buy her first home – a New Build townhouse in Christchurch. But she’s a bit nervous to take the plunge.

First-home buyers are making up the most amount of the market they’ve ever had. It’s about 27-28%, according to CoreLogic.

On top of that, listings are increasing.

The last 6 months have seen a massive increase in the amount of homes coming to market. It was much larger than we usually see at this time, according to the Real Estate Institute of New Zealand.

So, if you’re a first-home buyer out there like Emily, the answer is it certainly could be a good time to buy for you. After all, it’s a buyers’ market.

Most people expect house prices to increase over the next 12 months. If you decide to buy in 12 months you’ll likely pay a higher price.

Scenario #4 – Should I invest?

Interest rates are still extremely high.

This is putting some investors off.

This means if you buy an investment property, more than likely you’ll have to top that property up.

Valocity predicts only 7% of properties purchased today are cashflow positive.

This means that for 93% of properties the amount of rent isn’t covering all costs of owning that rental property.

Sure, the amount of top-up is higher now, because of interest rates. But it’s pretty common for properties to be negatively-geared in any market.

Now, if you have the cashflow to handle the top-up, it could be a really good time to invest.

Most economists agree, and the data suggests, that we’re at the bottom of the market. This puts you in a good position to nab a good deal, and get the most of the market increase.

But if you can’t handle that top-up contribution, you’ll probably have to wait until interest rates come down.

So … what should I do?

The right thing is different for everyone.

A falling market is not a bad thing for everyone.

If you want to buy and sell in the same market, then it could be the right move for you right now.

If you're a first-home buyer and want to take advantage of lower house prices, now could be a great time to buy.

But if you’re sitting on an existing property that you want to sell for a premium price, this is not the market to sell. In that case, it could be a good idea to wait it out.