How long should you wait to sell?

There's no hard and fast rule about how long you should live in a home before selling it, but it is costly to sell as well as to buy a new home, so it is generally not advisable to sell within a couple of years of moving in.

Ideally, you should aim to stay in your home at least as long as it takes for the value to increase enough to offset costs such as the transfer duty, legal fees and bond registration that you had to pay in addition to the purchase price of a new property.  

Generally, this will be between five and seven years, but that can vary greatly depending on market conditions at the time you bought and currently, as well as the terms of your home loan, personal or family circumstances and changes in your area for better or worse. There is a lot to consider.

For example, if you bought back in mid-2019 when the market was in decline, the value of your home has probably grown quite considerably and now might be a good time to sell, especially if you are planning to downsize and the proceeds of your sale would give you a substantial deposit on your new home.

On the other hand, home values are likely to rise even faster once interest rates start to decline, and your profits from a sale could be even greater if you are prepared to wait until then to list your home. At that stage, you will also have paid off more of your home loan, so you will also have more equity in the property, which will further increase your gain.

However, if you bought your home post-pandemic and have been seeing slow value growth due to the high interest rates that are keeping many buyers out of the market, this is probably not the best time to sell unless you are having difficulty keeping up with the bond repayments or have another pressing reason to do so.

Either way, though, it is advisable to consult with a property professional and obtain accurate and current information about demand and price trends in your specific area before you make a decision. 

Typically, though, owners who sell within two years of purchase can expect to  incur a financial loss due to the high property transaction costs that they have to carry, those who sell in the two to five-year window can expect to break even or make a small profit and those who wait five years or more will be looking at a significant gain, especially if they have worked at building up their equity.

Home equity is essentially the difference between the property's market value and what the owner still owes on their home loan. So, if you pay a 10% deposit when you buy, your initial equity in the property is 10%, and this will increase as you steadily pay off your home loan - and grow faster if you pay off an extra amount each month.  

In short, the longer you wait to sell, the less you are likely to owe the bank, and the greater the share of the sale proceeds you'll be able to keep as your own - quite apart from any increase in the value of your property since you bought it.

But before you start celebrating a combination of high equity and good capital gains and decide to cash in, it's also important to think about the broader economic picture. At current levels, interest rates are not only making it more difficult for prospective buyers of your home to qualify for loans and prompting them to negotiate hard for lower prices.

Higher interest rates also mean that you could end up with a higher bond repayment each month if you buy a new home and have to pay more interest on that property over the life of your home loan. In addition, it may take you much longer to build up equity in the new home because you cannot afford more than the minimum bond repayment each month.

Consequently, it might just be better to hold for now if you want to sell and wait for rates to start declining. If you must sell now, however, it's essential to work with a reputable and experienced agent who is really well-versed in your local market and that you trust to guide you through all the ups and downs of the process and give you sound and honest advice about the results you can expect.