We are in a transitional market coming out of an unprecedented run of rising prices. Some Sydney suburbs have witnessed eye-watering growth, particularly those that offer substantial family homes or a life style by the sea.
However, the market downturn is reflected in the city-wide auction clearance rate, which has dipped below 60%, as consecutive rate hikes, rising inflation, and weaker consumer confidence take their toll.
Some economists are forecasting falls of up to 30%. However, as an agent who has experienced this rollercoaster, I do not share the same level of pessimism, but I wouldn’t be surprised to see prices fall by 10% to 15% over the next 18 months.
Consider selling today – Rental income VS Cash term deposit.
Property is generally considered to be a less risky investment than shares. It may deliver a relatively predictable cash flow, solid returns, and tax advantages and is likely to appreciate over time.
However, if you own a property that is CGT free and you are relying on its income, you may find that your return on the investment value is hindered by land tax, rates, property maintenance and administrative fees.
With a cash deposit at 3.70%pa,a $4 million property value will yield you $148,000, whereas the rental income of $85,000 less land tax of $41,000 and other related expenses will return $35,000 a 0.7% yield.
In such scenarios selling and repositioning your equity to other forms of real estate or cash, a term deposit is the better option, especially for retirees who are relying on their passive income.
Consider selling today – if you are in the process of separation
I myself experienced the process of litigation, where things can collide with the downturn of the real estate market. Unfortunately, in case of a separation or divorce, the cost of a down in the real estate market is often more damaging than the money that separated couples argue over.
Adopting a business approach to your separation or divorce and then working together on how to maximise the pool of assets is smart. The most frequent argument amongst between parties is determining and agreeing on the value of the matrimonial property. Once the property is sold, the sale proceeds will be held in trust until the division of assets is determined at a later date.
Downsizers hoping to cash up by moving into an apartment are advised to rethink. The process of buying before selling comes with its own risks;
Consider selling today – if you are downsizing.
a) Off-the-plan prices have not yet factored in current market conditions in a falling market;
b) You are relying on selling your property at a later date, where prices are expected to drop 10 to 15% by next year;
c) An oversupply of off-the-plan apartments is hitting the market;
d) New apartment prices have not been tested by the market.
Consider selling today -if you are upsizing.
After all, the vast majority of sellers are also buyers, and it is now much easier to transact in the same market.