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Be careful not to get priced out

Discussion in 'Real Estate' started by Haumea, 5th Jun, 2018.

  1. Haumea

    Haumea Member

    Joined:
    18th Apr, 2018
    Posts:
    5
    Location:
    Sydney
    Bought my PPOR in late 2012 for 1.1million in lower north shore, Sydney. This was not an easy transaction for our household, just barely qualified for the mortgage.

    Five years and 2 months later, an identical property in my street sold for 2.2million

    So, the property increased around 100% in 5 years, a gross increase of 1.1 million. Pure random luck in the market. I can honestly say, I did not see this coming.

    My household is on a relatively high income, but there is no way that our household, let alone one person, has earned 1.1 million in 5 years.

    Ironically, now we would not be able to afford our home, if we hadn’t bought 5 years ago.

    While I don’t expect the same increase in the next 5 years – in fact I expect the property to lose some value - I wasn’t expecting a doubling in the last five years either.

    Real estate agents constantly proposition us to sell the property. While tempting, I know that would be a trap. How could I know that I could afford to buy back in the same location, at a later date? Short answer, I can’t know that.

    I’ve heard of other people, like retirees, selling up and moving location, regretting it, and then being unable to return.

    Warning for young-úns – and not so young-uns – be careful not to get priced out of an area, consider whether it would be better to leverage an existing asset than sell and be unable to buy back in.
     
    twisted strategies likes this.
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

    Joined:
    9th Jun, 2005
    Posts:
    4,776
    Location:
    Sydney, Australia
    This is what a lot of people new to the real estate market don't tend to appreciate. They hear adages such as "property doubles in value every 7-10 years" ... which is generally true over the long term - but doesn't reflect the reality that property prices will generally be stagnant or fairly slow growth for an extended period (or even slightly negative), and then the boom when all the price rises occur can be as little as a couple of years.

    It doesn't always happen this way - but it is a generally observed pattern.

    But yes, it can be an issue that if you sell out (eg to take a position interstate/overseas for a few years) you may find it difficult to buy back in if your period of absence from the market happens to coincide with a boom period.
     
    twisted strategies likes this.