Why I'm Not Worried That My Apartment Dropped in Value
The fate of the property market in Melbourne is pretty uncertain at the moment. Some people are freaking the hell out and throwing their properties on the market faster than the shrimp can hit the barbie (lol at Australian stereotyping) and some are vowing to stay put for the rest of their days despite their 5 bedroom house no longer being suitable for their childless retirement plan.
Okay, real talk. If you were planning on selling a property and not buying another – or you critically need to sell a property for financial reasons – the market would be pretty scary right now. The reason being, if you’re selling a property in a declining market, you’re probably going to get less for it than you’d like.
But that only applies to a small percentage of people who are selling a property without buying another. If you’re simply moving house, yes you’re selling low, but you’re buying low, too. Meaning in a few years when the market recovers, you might’ve lost some cash on your original sale, but you’ll have snapped up your new home at bargain bin prices and enjoyed the capital growth as the market recovered.
The property market only really matters if you’re selling. There, I said it.
Real talk: my partner and I bought our apartment for $403,000AUD. Yes it’s a one bedroom apartment, yes that’s a lot. We got caught in a fierce bidding war at auction, and the market was booming louder than the bass at RnB Fridays Live.
Now the market is plummeting. Apartments around us are passing in (that means not selling at auction), and nobody is buying because the banks have got stingy AF with lending.
I’ve no idea what our property would be worth if we sold it. If we put it on the market, we could get tens of thousands less than we paid for it, not to mention the cost of selling and agent commission. We *could* even be in negative equity.
But I don’t care.
Side note: negative equity is when your mortgage on a property is higher than the value of the home. So if you sold it, you wouldn’t be left with enough to repay the bank.
We don’t plan to sell any time soon. It’s essentially an investment property that we currently happen to live in. The mortgage is small enough that we can afford to pay it comfortably, we have income protection insurance for disasters, and we plan to rent it out once it no longer serves us.
So does its resale value currently matter?
The media is constantly pumping out dramatic headlines, putting the fear in the minds of homeowners and investors that they’ll lose everything at the hands of house prices. But what’s really happening is a market correction – it’s very normal. Demand went bonkers which pushed house prices up far beyond the usual steady value growth, and now the market is adjusting to bring us all back down to earth.
CALM THE FUCK DOWN GUYS. If you don’t currently own a home, get ready, because prices are falling and you have a rare opportunity to get in. If you do own, ask yourself whether you actually plan to sell any time soon. If the answer is no, what next door sold for ultimately means squat to you. If the answer is yes, just remember that prices are often like-for-like. If you’re selling low and buying low, there’s money to be made.
Disclaimer: information contained in the article is reflective of my personal views and experience only. These opinions are not to be taken as advice, and The Broke Generation recommends seeking qualified support tailored to your personal situation.