A few of my friends and clients have asked me whether it’s a good time to buy and/or sell considering what is going on in the world. Here are my thoughts based on what we know so far…
Note: Last updated 24th March 2020.
Lockdown announced! This will effectively push a giant ‘pause’ button on nearly all real estate transactions and all the advice below will start to apply once the lockdown is lifted and people begin making real estate decisions once more.
If you are in the middle of buying a property right now…
Speak to your solicitor and your bank urgently to arrange an extension of your contract or settlement date (or both).
I expect there will still be some limited real estate activity during the lockdown period. Buyers will be looking for opportunities and making offers ‘sight-unseen’.
Meanwhile, sellers will be prepping to go on the market when the lockdown has been lifted. Now is the perfect time to get all those little jobs finished around the house!
I’m about to make an offer, should I still go ahead?
It depends. Is this home perfect for you? Properties that we fall in love with can be hard to find. If you think this is ‘the one’ then you may want to take a leap of faith and get stuck in. You can lower your risk if you plan to stay there for the long term.
If, on the other hand, the house isn’t your ideal home but you feel like it will do for now, then you need to consider how much flexibility you have around timing. Could you stay put in your current living arrangement for 6-12 months to ‘ride-out’ any short term craziness in the market? Or are you going to need to move sometime soon?
Will prices go up, or down?
It’s important to remember that markets often don’t respond the way you think they will and timing the market is generally a fool’s errand.
With that being said, if I was looking to buy a home and I had time on my side, I would be tempted to wait a few months and see how this all pans out.
Prices may drop if buyers decide to stay home instead of going to visit properties. Thereby reducing demand and the amount of competition in the market.
At the same time, prices could start going up if a whole lot of sellers hold off going on the market, thereby reducing the number of houses available to buy. This could coincide with a sudden rush to buy as people try to jump on the ladder before their finance pre-approvals are due for renewal.
I would suggest we are far more likely to see panic buying, rather than panic selling in the coming months, which offers another reason to wait and see what happens as panic buying would result in a sudden increase in prices, but that increase is likely to be shortlived.
Traditionally, kiwi sellers hate to risk taking a loss and like to stay put when there’s a figurative storm brewing. When the global financial crisis hit in 2008, most sellers held off going on the market for a year or two until the dust had settled and prices recovered somewhat.
But what if I have to buy / sell now?
The reality is, real estate decisions are often forced upon us and come with deadlines:
- A new job means you need to move to a different city
- Relationships break-up
- Death in the family means you might have a vacant house to sell
- You might have already bought and need to sell your own home
- Baby on the way
If you are in this situation, try to take a long-term view of the situation…
Long term horizon
Thinking long-term lowers your risk and also helps you put decisions in perspective.
If you buy now but prices drop because of Covid-19, then you should do just fine as long as you plan to stay in your home for 5-10 years (and as long as your job isn’t at risk, of course).
If you go on the market shortly and end up selling for a bit less than what you might have achieved in February, remember that it’s probably still a truckload more than you would have sold for a year ago, or even 3 months ago in many markets.
Questions for buyers and sellers to ask
I would speak to agents in your local market regularly and try to gauge how your market is responding. Remember though, if you ask a real estate salesperson “Is this a good time to buy / sell?” most agents will inevitably say YES!
So instead, ask specific questions like:
- Have visitor numbers gone up or down over the past few weeks?
- Have you noticed a jump in the number of houses coming on the market? Or a reduction?
- Have you had any owners decide not to sell now due to current events? If so, what proportion?
- What would you do if you were trying to move right now?
Tips for surviving this market
- Do appraisals by video-call. You can contact your real estate salesperson via Facebook messenger video call, g-chat, skype, WhatsApp video. Guide them around your home and they should be able to give you an appraisal without any personal contact.
- If you are on the market, all viewings should be ‘by appointment’ rather than via open homes for the first shortwhile once the lockdown is lifted. This means more hassle for everyone but it’s the safest approach.
- Homeview (3D virtual tours) should be available for every single listing. These are available for a minimal investment (usually a few hundred dollars) via open2view and other providers.
- Agents – please put more info in your adverts. Buyers are going to be reluctant to view properties unless absolutely necessary, so help us make choices by providing a high level of info online: Rental appraisals, rates, preferred settlement dates, price indications. Whatever info you can add to save people time and hassle will be well received right now.
- Make info easy to download. Use a system like PropertyFiles to make it easy for buyers to download information and review it from the safety of their own homes.
- Make offers sight-unseen that are ‘subject to viewing the property’. This is an option I would seriously consider right now.
When is the right time to buy real estate?
You should buy a property if you know you’ll be able to afford to hold it for the next 5 years and beyond. Even if interest rates increase.
Remember, it’s far more important to buy the right property than it is to buy at the right time.
For more answers to financial questions relating to Covid-19, check out this recent post by Darcy Ungaro (financial adviser)
For more advice on timing the market, check out this post.
Have a question? Would you like advice specific to your situation? Book a 30-minute consultation online.
Photo by Dan Freeman on Unsplash