We Thought You Might Be Interested!
We thought you might be interested in the following read!
It’s been some time since we have spoken and undoubtedly you have heard that the property market has been falling and I thought that it may be helpful for you to know that all is not negative news.
Of course for those not looking to sell their property, price fluctuations in the property market are absolutely meaningless, as your property is your home. Although it is nice in an upward market to know that you are building equity it’s not something that you are looking to liquidate and take advantage of and the same applies in a falling market, you’re not selling so you are not losing any money. You still own your home that you are comfortable in and that you love.
For those looking to upsize, a falling market actually makes you money. How? Let me explain.
When a property market falls it does so across the price spectrum from a 6 bedroom mansion to a single bedroom studio. Property markets fall as a percentage of price. This means that a mansion worth $1,500,000 and a studio worth $350,000 both fall by the same percentage in price. As an example if there was a fall in prices of 10% then in the situation above the 6 bedroom mansion would fall by 10% (by $150,000), and the studio would also fall by 10% (by $35,000).
Thus the changeover for the studio owner to purchase the mansion has just become a whole lot more affordable.
I will show you.
Prior to the market falling the studio was worth $350,000 and the mansion $1,500,000. The studio owner after selling their home for $350,000 would have to borrow $1,150,000 (ignoring other costs for simplicity) to purchase the 6 bedroom mansion
If the market falls by 10% the studio would now be worth $315,000 and the mansion would now be worth $1,350,000. As above, the studio owner after selling their home for $315,000 would have to borrow $1,035,000 (substantially less) to purchase the same 6 bedroom mansion (again ignoring other costs for simplicity).
In a falling or fallen market it is definitely the time to upsize if this has been your dream.
Ok, what about investors? Has your accountant spoken to you about tax benefits? Is there a benefit for you to upsize your investment property or simply add to your portfolio? Well, based on the same principle above, it’s now cheaper to add to your portfolio or upgrade to a more expensive property than it was two years ago. Winner!
Now you may say that I have mentioned ‘other costs’. Well guess what? In a falling or fallen market those other costs are less than they were previously. Yes, the cursed Stamp Duty is less than it was. The agents costs are also less than what they would have been previously as they are usually a percentage of price (unless you go with a Purple Bricks style of agent that charges a flat fee up front plus advertising up front meaning that you pay whether the agent sells your property or not. Yes this means that you pay the fee and advertising if the agent does not sell the property or if you decide not to sell your property if the agent can’t get you what they said they could, it’s a big risk!).
So, the outcome of a fallen or falling property market is a great opportunity to upsize at a lower cost OR a great opportunity to upscale your investment OR a great opportunity to buy a property at a substantially cheaper price than you could have previously.
Falling markets are exciting for switched on home buyers and if you would like to know more about the property market that you are in and how you can take full advantage of it I would be more than happy to make an appointment with you to discuss how it can advantage you financially
Andrew Cook & Megan Stevens