Commercial property is a major asset so you’ll want to get the best return possible when you decide to sell.
In a tough economic climate, it’s not surprising that many property owners want to get rid of their assets when prices are fluctuating.
And Britain is certainly going through a period of uncertainty, with an exit from the EU on the horizon.
So, when is the right time to sell exactly?
Should you hang on to your property and sell it in a more stable economic environment or should you sell now?
Recession, recovery and expansion
When choosing when to sell, you need to keep an eye on market trends. Property value will rise and fall in a cycle of recession, recovery, expansion and contraction.
Selling during a recession is not advisable, as a lack of funds for potential buyers and low prices mean that you will likely end up with a poor deal. Buyers will benefit from nabbing prime locations, but sellers will not.
Finances become plentiful during the expansion phase, and demand increases so up your selling prices. This is the perfect time to sell and the trick to getting the best price is in knowing exactly when the market is peaking, much easier said than done.
After expansion comes contraction, prices are starting to fall and can lead to a recession in prices. As financing becomes difficult, investors will start to move out of the market and so your decision to sell should be based on need.
Is time on your side?
You need to time when you sell your commercial property correctly as you will find that the process will take much longer than residential sites. When you first bought your property, you were probably looking for a long-term, high-yield investment, so keep this in mind, and never hastily act solely in regards to market trends.
An example of this was in 2010 when so many landlords offloaded their assets because they believed that the government was going to raise Capital Gains Tax, the tax you have to pay on any profit you make from a property sale, to 50 per cent. When the increase was only 28 per cent, many found that a quick sale had cost them a lot in the long run.
Furthermore, a terrible market may mean that you are in negative equity, where the property's value is less than what you originally bought it for.
It is wise to consider a variety of different aspects for choosing when to sell. Be sure you are on top of your expertise when it comes to commercial values, interest rates and any changes to taxes that apply to you.
The ultimate aim is to buy low and sell high. A very simple method to judge the market is thus: if everyone is talking about buying, you should be selling and if everyone is talking about selling, you should be buying. At the same time, however, try and not follow the mass mentality, as you may end up losing out in the long-term. A combination of market trends and gut instinct will go a long way.