Sell IP or wait until Coronavirus threat subsides?

I am planning to put a townhouse in inner ring Sydney on the market in about 2 months time (have already given notice to tenant) but concerned about the Coronavirus threat will dent market demand. The location isn’t dependent on Chinese buyers/int’l student renters but wondering if I’m better off keeping it rented for another year until the threat and negative headlines subside - they are good tenants as well. Or sell in case the broader economy enters severe downturn from the impact? Thanks.

 

I think it really depends on how long this goes on for.

Australia has the world's second largest debt fuelled housing bubble. Household debt to income is almost 200%. If this goes on too long and as jobs are lost, its going to be harder and harder to service all this debt.

I don't know if you watched the ABC news tonight. Commentators are saying this is likely to trigger one big global debt crisis.

Why are you selling?

 

Have your tenants confirmed their willingness to stay in spite of knowing you will 'kick them out sometime soon down the line'? Whats the strategy if they decline the invitation to remain?

 

https://www.abc.net.au/news/2020-02-28/coronavirus-contagion-spawns-climate-of-panic-on-share-markets/12011156

I don't think I would want to be hanging onto inner ring Sydney property when the debt bubble explodes.....

 

I'd probably try and sell sooner than later, especially with all the stimulus for FHBs going on.
If things get even worse it starts to effect the bottom line of state government budgets and all those little tax breaks,stamp duty exemptions and FHOG start to come under the spotlight as they look to cut wastage.
But it really depends on what happens over the next 6 months, many countries still havent totally recovered from the GFC , and its just being masked over by really low interest rates, especially in Australia, which is a dangerous place to be if financial markets start tanking again.

 

We are in a similar postion wanting to sell in 3-4 months time but have worked out our plan, if the markets change we keep it, if not then continue to sell.

By asking people sell or wait due to coronavirus is the wrong way to go about it. You really have to ask yourself what financial postion you are in and can you handle it if property prices drop, or go sideways, do you need the money now, can we sell later and still be ok etc etc.
More important is what is your market currently doing? Are prices selling well? Are people attending auctions? Can you achieve good money today? Then continue to monitor this market closely by attending and following prices/listening to agents etc.

If you fill your head with all the negative news today when your current market is doing well then you will end up selling for less as you might spook yourself into a quick sale when the market isn't spooked at all.

 

The other question you have to ask yourself is what happens if you or your tenants lose their jobs. Can you still service the mortgage?

 

If you have lendlords insurance in place and on lease ita not an issue. If your finances are in check again should not be an issue.


Abc is consistently and systematically against property investment its actually a disgraceful joke.

I would not base any decisions on the ABC reporting of any kind.

 

To hang on to 'anything', one needs to be invested in the first place!

Re the 'explosions' of debt bubbles, I have been hearing it since 2000 that they are 'about' to explode.. The only explosion over the past 20 years has been on my bal sheet with prop values more than tripling since then. If a giant explosion erodes 20% of their value, that gives us investors massive new opportunities to buy big in this ultra-low long term interest rate environment.

 

Thanks all - I can finally reply to this post (insufficient privileges in the previous forum)!

Reason for selling is mainly to reduce mortgage debt of $890k. It’s P&I and I’m paying around $2k/mth after rent and expenses (although repayment includes capital, so the cost is really about $1k). Also, the land value of this property (on top of my other ones) just exceeds my land tax threshold so I’m paying $6k pa. I know these costs can be tax deducted and but I’m just a bit wary of all the cash outflows - I can manage with my current income but don’t want to be so exposed in case something unexpected happens. I also spent a lot on house renovations with a bit more to do and want to have a bigger buffer.

I bought the townhouse 5 yrs ago for $960k and expect $1.1-$1.2m and I know I’ll get future capital gains if I hold on to it for longer. I was thinking of keeping it for my future retirement as a downsize property (I’m currently 40) but it’s about 10-15min walk to the shops so I’m better off finding something closer and single level down the track. It is a few minutes to the light rail and the young couple love living there though.

I consulted a property adviser/buyers agent a year ago and she advised me to sell my other city-fringe unit (it’s got a bad layout but in a quiet street, low rise and walking distance to CBD) and keep the townhouse as it’s a better long term asset instead. However I’ve had the unit for 10yrs and is slightly positive geared with a much smaller mortgage and always tenanted, and I want to keep it as an income stream for retirement when I pay it out. Also the capital gains tax will be greater with this unit, I estimate $50k.

A benefit of selling is I can put the proceeds to my PPOR mortgage, do a refinance and have that as a buffer, or perhaps buy a cheaper quality property in Brisbane (possible retirement place?). My broader strategy is sell my house down the track and pay off my 3 IPs for income stream (currently neutrally geared), but also have enough money for a downsize retirement property.

 

Yes that’s what I was thinking - sell the property into a Coronavirus buffeted economy, or hang on to the property with the risk of tenants losing jobs if the whole economy gets worse, and then being harder to sell.