Given the current market volatility and rising interest rates, should you sell your home or rent it out for a better financial future? Well, the answer varies.
Like it or not, our personal circumstances often change. Some are planned for, such as downsizing to prepare for retirement, or upsizing to cater for a growing family. Others, such as a negative health condition or a new job, usually come as more of a surprise. Maybe you’re just craving a sea change, but either way, many of these scenarios will leave you with a big conundrum: should you sell your home or rent it out?
Unlike seasoned investors, renting or selling the family home or your primary dwelling comes with an enormous amount of responsibility, and additional considerations that generally don’t apply to a purposefully purchased investment property. While there’s no clear cut answer that will apply to every homeowner, the right path forward will usually boil down to three factors: your financial position, your appetite for investing, and your willingness to manage life as a landlord.
What To Consider Before Selling Or Renting Your Home
While the data shows that the era of the seller’s market may be coming to a close, it’s a different kettle of fish when it comes to the world of rentals. In Melbourne alone, property values are down 3.4% since the February 2022 peak, with house values down 4.1% and unit values falling by 2.1%.
Of course, house values recorded a much larger upswing, and rose by almost 21% through the growth cycle compared to a lower 10.5% gain across the unit market. As home sales have declined, listings have risen, with Melbourne recording 10% more active listings in July than a year ago.
Despite the pandemic induced mass exodus to rural areas and interstate, rental vacancy rates across Melbourne and regional Victoria are dropping. While we may not be experiencing the same level of renter distress seen in the likes of Queensland, the era of dirt cheap rent and too many empty properties seen during the height of lockdown is now over.
According to SQM Research, the vacancy rate across the country decreased from 1.7% to 1.0% over the past year, which equates to one vacancy for every one hundred rental properties. With Sydney and Melbourne still recording vacancy rates of just over 1.50%, it’s the remaining six capital cities that have vacancy rates below 1.0%, signifying the challenging conditions across the nation for tenants.
New figures from CoreLogic have also found that in the last financial year, capital city and regional rents have risen by 9.1% and 10.8% respectively, a positive sign for property investors who are also able to command a higher price for their property, should they choose to sell.
Keeping in mind that a ‘healthy’ rental vacancy rate is considered to be 3%, we may not be in a seller’s market anymore, but it has certainly transformed into a landlord’s market. When debating whether to sell your home or rent it out, there’s arguably never been a better time to go for the latter – providing that you’ve secured somewhere else to live first.
If you’re still unsure about which option is right for you, other factors to consider include the possible landlord tax breaks linked to negative gearing, whether your move is temporary or not, or if you require the property’s equity over the long term rental yield. It’s also important not to prioritise short term gains with a greedy approach, as an empty property listed for a price deemed to be too high will cost you more in the long run.
More often than not, homeowners need to sell their current property to obtain the deposit that they need for their new mortgage. If you can finance your new home without selling your current house, then renting is an option. However, if the idea of being a landlord and managing the responsibility of tenants isn’t appealing for you, then it’s arguably never been more important to partner with an expert as a means to command the best sale price, with the shortest possible listing time.
Should you be looking to sell your home or purchase a new one, enlisting the services of a free property advisor like ESPA can often be a game changer. As an example, your advisor would likely research the property, local agents, check the zoning, evaluate market conditions, and communicate clearly with you regarding all of your options – but where do you find one?
Take The Stress Out Of Selling Property
As a completely free service, Emergency Services Property Advisors provide property advisor services to Police, Fire, Ambulance and S.E.S personnel and their families right across Victoria.
Luke and the team at ESPA are passionate about providing support to some of Australia’s most valued public servants. Along with key industry insights, ESPA also works with a broad range of service providers linked to the real estate industry such as conveyancers, trades, legal practitioners and mortgage brokers.
If you are an emergency services worker looking to potentially buy or sell property in the future, please get in touch with Emergency Services Property Advisors today to discuss how we can turn your real estate dreams into reality, or call Luke directly on 0414 757 705.