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Is your home worth $10,000’s less since COVID-19 impacted?

Kyle Austin / Posted July 6, 2020 / 0 comments
Is your home worth $10,000's less since COVID-19 impacted

Is your home worth $10,000’s less since COVID-19 impacted?

It is a question currently on every homeowners mind – how is COVID impacting the equity in my home? Unfortunately, the pandemic has caused the real estate market to decline and it is very likely you have lost value in your home. There is more to the story though and it’s definitely not all doom and gloom.

 

What impact has COVID actually had on the market?

The real estate market has definitely been impacted since the pandemic began although it has been relatively minor so far. The market has dropped approximately 5% caused by factors including

  • Many buyers dropping out of the market due to losing their jobs and being unable to borrow.
  • Lack of confidence due to the tough economic climate.
  • Previous lockdown restrictions including banning of open homes and auctions.

There is also a shortage of properties for sale in the overall real estate market. Although the Blue Mountains is defying this trend with a good volume of properties still selling and coming onto the market.

 

The worst is yet to come

The big risk to the real estate market is distressed sales where homeowners sell their property at a reduced price. Distressed sales are typically caused by people losing their income and not being able to service their loan or needing to come up with funds quickly for example to prop up their business. If this occurs, asset prices will plummet.

The current impacts to the real estate market are relatively minor and are not fundamental problems like distressed sales. We are unlikely to see distressed sales for another 6 months or more as the economy is artificially propped up by the stimulus measures and loan deferrals. We are likely to see distressed sales during the period once these measures end and the economy needs to stand on it’s own feet again.

It is impossible to determine exactly how bad this will be though and the severity will depend on factors including

  • If the Government extends or introduces more stimulus measures.
  • Whether we are faced by a 2nd or 3rd wave which results in stricter lockdown restrictions.
  • The provisions banks put in place for people who cannot afford their homeloans.
  • What the true unemployment rate will be

 

Limiting your risk and losses

You can substantially reduce or even entirely mitigate any risk and losses by playing your cards correctly. If you own property, it is critical that you know your position and watch what the market is doing. How you limit your losses ultimately depends on your specific circumstances. However here are the key strategies we have recently been giving our clients

  1. Sell now – In an ideal world you DO NOT want to sell in a downturn. Prior to the pandemic, prices were just about to tip over record prices for Sydney and most suburbs. Prices are still only slightly less than record prices. Therefore if you look long term, right now is still a very good time to sell. The market will remain relatively stable until around September when the stimulus measures and loan deferrals are set to end which provides a great window to sell.
  2. Ride out the storm – If you miss the next window to sell and want top dollar for your property, you’re going to have to wait until the downturn is over and things return to their current level. The downturn is expected to last 2-3 years so you do need to be prepared to wait for a reasonable period of time. It could be 5 years, give or take, until prices return to as high as they are now.
  3. Make it up when purchasing – If you do have to sell during the downturn, then you should be able to make up any losses when purchasing again. This means you will end up in the same net position as you would have prior to COVID provided you’re buying and selling in the same market. If you’re upsizing and spending more than what you sell for, the downturn will actually work in your favour and close the gap. If you’re downsizing though then it could actually work against you so this should be a key consideration.

 

How to find out what your property is worth

Are you wondering how to actually work out what your home is worth? What about how to make sure you’re not losing $10,000’s? We suggest organising a Market Appraisal with a quality local real estate agent so you can have all these questions answered and more. AVVED is currently running an offer where anyone who gets a market appraisal receives a FREE Family Holiday valued at $1400. Click here to find out more on this offer.

We offer Market Appraisals as a complimentary service and provide the following

  • An estimate of what your home is worth in the current market
  • How to reduce your risk and losses according to your specific circumstances
  • The ins and outs of selling your home
  • The opportunity to answer any queries you may have

 

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