The coronavirus divorce spike is having an impact on property prices. Many have heard that the financial impact of shutting down the economy, coupled with the stress of being in quarantine for months, is causing a surge in divorce rates. That increase is also impacting property values.
In Great Britain, there has been a 42% rise in divorce inquiries between mid-March and mid-May, compared with the same period in 2019, according to the figures from Co-op Legal Services.
Based on the latest divorce data from the Office for National Statistics (ONS), this could mean an extra 38,346 couples could be calling it a day in 2020.
Some are speculating that therefore; the property market could see a boost of 38,346 homes entering the market if these additional divorces lead to the sale of the family home.
With the current average UK house price at £243,809, the addition of divorce properties hitting the market could total over £9.34bn ($11.85bn) in transactions for the property market, according to research from estate agent Barrows and Forrester.
I have written on the topic of divorce and coronavirus issues in the past. For many couples simply putting a shared home up for sale may seem like the simplest solution, but remember, that step won’t automatically erase all mortgage headaches or end the need to co-operate with your former spouse.
You will still need to agree on a realtor and asking price as well as determine how the continuing mortgage payments will be made. Will you be splitting the expense 50/50? Will the spouse who continues living there make the full payment?
If your home sells for more than the outstanding balance on the mortgage, how will the remaining proceeds be divided between you both after settling the joint debt? Worse, if you end up underwater on the mortgage, you’ll have to decide if you can even afford to sell it and how you’ll pay off the remaining debt if you do.
There are also the taxes. You can each exclude the first $250,000 in capital gains — the amount your home has appreciated in value since you bought it — from your taxable income, if the home was your primary residence and you owned it for more than two years.
If you opt to file a joint tax return, you can exclude up to $500,000. Earnings above that exclusion or on the sale of, say, a vacation property, could stick you with a tax bill.
Miami Divorce Spike and Property Prices
The surge in divorce filings and the impact on property owners, it is thought, could provide a much needed boost to the industry which saw market activity slow to a trickle for much of the lockdown as the UK government urged against house moves, with many estate agents shutting their doors with physical viewings and valuations off the cards.
The coronavirus sparked the biggest monthly fall in UK house prices since 2009, according to lender Nationwide’s closely followed house price index.
The same is true in Miami, where home sales in South Florida plummeted in April. Sales of both condos and single-family homes dropped nearly 40% in Miami-Dade and Broward from the same month in 2019.
Incredibly, median prices continued to increase. Median prices rose for both single-family homes and condos, despite the pandemic and drop in sales. Sales under contract in February and March, closed in April, reflecting a strong first quarter.
The median price for single-family homes grew by 7.3%, from $356,000 to $382,000. The median condo price increased by 6.9%, from $248,000 to $265,000.
More than 90% of median-priced single-family homes and condos sold for at or near the asking price. Cash transactions comprised 22.1% of all transactions, down from 34.8% in April 2019. That’s still more than the national percentage of 15%.
However, some think divorce property on the market could lift property stock and keep prices up amid a considerable increase in buyer demand since the industry lockdown was lifted in May.
Unfortunately, divorce is an inevitable aspect of modern-day life and one that has been exacerbated as a result of a lengthy lockdown at home with our significant other. It’s also one of three influences that regularly see properties come to market, along with death and debt, as couples look to divvy up their existing assets in order to move on in life.
The one positive of this is there has been a huge uplift in buyer demand since the property industry reopened last month but a continued hesitance by some sellers to list and this stock boost should help meet this demand while helping keep house prices buoyant.”
The UK Yahoo article is here.