Sell or hold?
This is the question many property owners may be asking themselves now and in the foreseeable future as the coronavirus epidemic continues to provide uncertainty in the real estate market.
It’s crucial that homeowners and investors take a measured and well thought out approach, taking into account all the relevant factors when making this decision in a market unlike any we have ever seen before.
This is what you should take into consideration.
How to reap the rewards of the cycles
“There is a saying I have lived by during all my time in real estate,” says Brad Teal.
“It’s time in the market, not the timing of the market”
This means riding the ups and downs of real estate.
“If you’re trying to pick the highs and lows you will find it very challenging. What you want to do is reap the rewards of multiple cycles,” Brad says.
It’s a confronting time for all of us, owner-occupiers, investors, landlords and renters. For some of people, the financial stress will force them to consider changes and that is understandable.
However prices for both houses and units in Melbourne have been remarkably resilient during COVID-19. Over the quarter to September, Melbourne prices have fallen 3.5 per cent but they remain 5.9 per cent up over the last 12 months.
“Property cycles have pushed out from six to seven years to 10 year cycles and I expect that once we move to living with COVID-19 or finding a vaccine property prices will stabilise,” Brad said.
“Victoria might be something of a shunned state now but before we were a shining light. I believe we have the right chemistry of immigration, education and infrastructure that will all come together again to make this city a very viable and liveable one,”
What are the tax implications of selling?
The tax implications of the potential sale of your property should be one of the biggest influences on your decision.
Whether the property is negatively geared. Whether it is capital gains tax free. What is the value of the property versus the return you are getting from it as an investment?
Are you getting the rental yield you want or need?
Is holding or selling the property the best move for your overall investment portfolio? If you sell your property or your entire portfolio what are the other stronger areas to diversify or reinvest in?
To help you better understand these implications and make your decision it is always best to get independent financial advice.
“We hold a massive property portfolio at our agency and we do everything we can to maximise our landlords’ rental return and to minimise their expenses,” Brad Teal says.
“Spending money on your property might help your bottom line and improve your tax situation if you’re renovating and the like. Spending money on your property can make it more lettable too.”
We work closely with landlords and tenants to ensure the best outcome.
Don’t sell out of fear
History gives us a good lesson here.
Melbourne property losses caused by the Global Financial Crisis of 2008 were recouped in the early months of 2009. Those deterred by the high interest rates of the early 1990s didn’t enjoy the boom in the mid to late 90s when property values doubled in four years.
“If you have the money, go to your reserve of capital,” Brad says.
“Or you could go to your bank to refinance and rearrange your money.”
There are several options here including:
- If you have a loan against a property a number of years old, you could have that property revalued.
- Change your loan requirements so you can pay off the loan over a longer period and reduce your repayments.
What help is available?
If you are a landlord in stress or have tenants who are suffering financially, help may be available. Government COVID-19 schemes including JobKeeper and JobSeeker have allowed many to continue to meet their financial commitments.
A rent relief grant is also available for those who are experiencing financial hardship provided they meet the eligibility criteria.
Eligible property owners may also be granted land tax relief.
Your rental agent is also here to help.
“It’s better to have tenants paying some rent than none at all,” says Brad Teal’s Rental Department Manager Prue Bryant.
“That’s why we work as closely as we can with landlords and tenants to ensure we minimise the vacancy rate where possible. The industry average of vacancies in metropolitan Melbourne is three to four per cent. Our vacancy rate is 2.5 percent because we are always communicating with our landlords and giving them the right advice.”
Consider where you are in life
What you want from your property or properties will likely change due to your life stage. If you’re young and ambitious you might be willing to take some risks. If you’re middle aged you might want some consistency in regard to your financial situation. If you’re retired, you might be over it all and just want to cash in and enjoy life.
“You should look at your own individual situation, take independent financial advice and do what is best for you,” Brad says.