Should you sell or renovate? If these were normal times, we would give you the standard real estate advice – look at the pros and cons, consider the timing, investigate finance, find the right builder and so forth.
But we’re living in unusual circumstances. The property market in Australia – like the rest of the world – has been impacted by COVID-19. Any decision you make now – whether to sell or renovate your property – needs to take into consideration these challenges.
Sell or renovate? Sellers are slashing home sale prices because of COVID-19
Property owners dramatically dropped prices in March because of the pandemic. Prices were slashed in April as well with more than 13 percent of Sydney listings and nearly 11 percent of Melbourne listings slashing prices. All capital cities across the country saw a higher percentage of discounts than the same time last year.
The highest proportion of discounted prices by suburbs is in Sydney’s Northern Beaches at 17.6 percent in April. The second highest are Melbourne’s Mornington Peninsula and Inner South West Suburbs and Newcastle, NSW at 14.3 percent in April.
Sell or renovate? Banks are predicting property prices to fall
For many homeowners whose personal wealth is affected by the state of our property market, early predictions from the banks this week is not good news. The Commonwealth Bank is predicting an 11 percent drop in house prices from March 2020 to March 2023. National Australia Bank also released an 11 percent fall in property prices this year with a gloomy prediction that house prices may drop as much as 30 percent in the event of an economic downturn.
Property owners, particularly in popular Sydney and Melbourne who have held their properties for many years, will be cushioned by previous years’ price surges but new homeowners could face negative equity if the economy dives.
Sydney and Melbourne house prices will hold
Sydney and Melbourne homeowners may not be so adversely affected because nearly a third of the homes in both cities are owned outright and people will be doing all they can to repay their mortgages.
While prices may have dropped nationwide, there are very few listings of distressed properties up for sale (i.e. fire-sale scenario). This is good news actually because it means the property market price is holding. The reasons for this could be the prompt action taken by banks to relax mortgage payments and the government’s JobKeeper and business stimulus programmes to keep people in employment.
Property Investment Professionals of Australia said many higher priced-family homes should be able to hold their values through the pandemic crisis. Also, the re-opening of the economy could mean a better outlook for property owners who are considering selling or renovation (in preparation for sale). The established owner-occupied property market can expect buyers and investors to continue to show up particularly in the $1.5 million price range in Sydney and around the $750,000 to $1 million range in Melbourne.
The argument for selling and renovating
The majority of people are not going to lose their jobs and with a record, low-interest rates those who maintain their incomes are in a stronger position to invest in a new property or to renovate their homes.
Some experts believe a smaller listing could also create a dynamic situation where buyers scramble to buy what little there is on offer. The demand side is experiencing record low interest, attractive first-home buyer assistance and sensible credit policies. These elements can drive demand up as our economy starts to re-open and people return to their jobs.
Further good news for property owners has arrived with the lifting of bans on auctions and home inspections. NSW and Victoria are also considering dumping stamp duty which is another incentive for empty nesters to sell up and downsize.
Ready to sell or renovate?
Here are three important tips to consider:
1. What are the pros and cons?
Apart from the financial side of things, it is important to consider factors like family, neighbourhood and so forth.
For example, if you love living in the neighbourhood but want more living space for a growing family, renovating the home may be a better option than selling the house and moving to a larger property. If you are an empty nester with a home far larger than you need, you could downsize to a smaller house in a suburb with a great retirement living lifestyle.
2. What will it cost?
Selling or renovating will incur costs. If you are selling, apart from agent’s commission, stamp duty and legal fees, you may also have to pay for hiring removalists, cleaning fees and possession storing fees. There are also costs involved in buying a new property including title transfers, loan applications, the engineer’s report, valuations, conveyancing and so forth. The new home may also require some renovation.
If you are renovating your property, you will need to work out how you are going to fund the project. Be sure to also factor in project delays and unexpected situations into your renovation budget. If you are thinking of hiring a professional builder, you will also need time to find the right one for the project.
3. Who is going to do the work for you?
If you are selling it is probably a good idea to find a professional real estate agent to list your property for you. These are unusual times and trying to navigate a home sale online with the wrong agent may not be the most effective way to get the best price for your property.
If you are renovating, chances are a professional tradie will do a better job than a DIY quarantine effort. Unless of course, the work is fairly simple and you are particularly handy or have experience in home improvements.
While the property market has been affected by the virus, things are starting to pick up again. Many sellers who have put their sale on hold are considering listing their properties again. If you are in the same boat, now may be a good time to revisit that decision.
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