Knowing when to hold ...
…and when to fold
The decision of when to hold onto a property and when to part ways with it is far more nuanced than many might expect. The ability to discern the optimal moment can significantly impact not only a homeowner’s bottom line but also the owner’s lifestyle. According to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, “the decision to hold onto a property or to sell it involves a delicate balance of financial analysis, market trends, personal circumstances, and risk assessment”.
Just like with any other financial investment, the adage of “buy low, sell high” applies. However, timing the market is no easy feat. “Ideally, homeowners will want to sell in a seller’s market where qualified buyers are abundant – like when interest rates are at record lows. When demand outstrips supply, property prices increase which means that a seller has a better chance of selling the home at a higher price,” he explains.
But, Goslett also warns that even if you do manage to time the market correctly, “you need to keep in mind that if it is your primary residence you’re selling, then you will also have to purchase a new home within the same market, which will possibly offset any financial gains of selling in a seller’s market,” he clarifies.
‘Incredibly tricky’
Not only is it incredibly tricky to time the property market, but it can also be inconvenient and even imprudent depending on a homeowner's circumstances. Goslett uses the example of a homeowner who is no longer able to keep up with the repayments on their home loan.
“The longer you hold onto a property you can no longer afford, the worse the ramifications will be. The earlier you sell, the better your chances are to recover financially and to avoid blacklisting and tarnishing your credit score,” he notes.
When weighing up the decision on whether to hold or to sell, Goslett adds that any property purchase needs to be viewed as a long-term investment. “Profit on a property purchase does not happen overnight unless you are planning on flipping the home. To allow the property enough opportunity to appreciate, homeowners should plan to hold onto the home for roughly around five to ten years.”
“While some properties may benefit from long-term ownership, accruing value over time, others may demand a timely exit strategy to mitigate potential losses. In either scenario, the ability to discern the optimal moment to hold or sell can significantly impact an investor's bottom line,” says Goslett.
“My advice to those who are uncertain is to reach out to a local RE/MAX agent to get some free guidance. They can inform you on current market trends in your given suburb and can inform you of your home’s current market value – both of which will allow you to make a more informed decision either way,” he concludes.