Arnold
CibbuanoWorking The Slow Market
April 24th 2006 04:09
The Australian property market has been steadily slowing over the past couple years. Although a forecast cash has yet to occur, peak sales and market opportunity have definitely taken a down turn over the last half decade. With this cooling of the market, there is a lot of advice indicating that now is not a good time to sell. This advice has stalled a lot of people from changing residents or trading up property for fear of not getting a worthwhile return on their initial investment.
However, the trade has to be viewed relatively. Whilst a seller may not get the price they believe their investment is worth, the flipside is that monies invested in a new property should be rekindled on a new property investment which by market conditions would also be undervalued.
To bring a bit of mathematics into the equation, a slowing market does not equate to losses, infact, profits can still be yielded on a slow market.
As an example, lets say you expect your home to be valued at $500,000 but due to the lower market, you sell it at $475,000 which represents a market undervalued at 5%. Then invest in a property which under normal conditions is valued at $600,000 but at a 5% undervalued market is $570,000. We can see that initially you’ve lost $25,000 on the sale of your first home, but then gained $30,000 on the purchase of the new home.
So, you’ve managed to successfully moved to a better home and have a small net profit to splash on a home entertainment system.
However, the trade has to be viewed relatively. Whilst a seller may not get the price they believe their investment is worth, the flipside is that monies invested in a new property should be rekindled on a new property investment which by market conditions would also be undervalued.
To bring a bit of mathematics into the equation, a slowing market does not equate to losses, infact, profits can still be yielded on a slow market.
As an example, lets say you expect your home to be valued at $500,000 but due to the lower market, you sell it at $475,000 which represents a market undervalued at 5%. Then invest in a property which under normal conditions is valued at $600,000 but at a 5% undervalued market is $570,000. We can see that initially you’ve lost $25,000 on the sale of your first home, but then gained $30,000 on the purchase of the new home.
So, you’ve managed to successfully moved to a better home and have a small net profit to splash on a home entertainment system.
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