Sometimes I'm asked, "When is a good time to buy property". My answer is usually, "Now, is a good time to buy property."
Before I go on, let me be clear: I am a accredited finance broker and not a accredited property expert so I am not supposed to give advice on property. I can only give advice on your finance.
Now that it's clear where my expertise lies, I'm going to give you an opinion based on my conversations with estate agents, my own experience, research of the property markets, participation in property forums and networking events, lender economic presentations, and also based on conversations with clients including you.
Usually, and almost always, now is a good time to buy property because it could cost you to wait. It could cost you because:
of the lost opportunity
financing becomes more expensive
property prices increased faster than most people are able to save.
Opportunity cost
It's particularly a good idea to buy now because many areas are experiencing an upward price trend. Earlier this year, Australia's property prices turned a corner. Median prices began to rise again. For example, in Brisbane, dwelling prices rose by 1.4% in July and 4.2% in the last quarter. (Corelogic data 1/8/23). Are you missing out of the opportunity of capital growth?
Financing becomes more expensive
Even if the interest rates decrease, it makes sense to buy now rather than wait for the rates to go down. As prices increase, the amount of required contribution increases and / or the loan amount increases. Despite the decrease in interest rate, the repayments will be more because of the larger loan amount.
Property prices increased faster than savings
Again, as prices increase, the amount of required contribution increases. Most people are unable to save faster than the rate of price increase.
The following table demonstrates a scenario where prices are increasing at 4.2% a quarter and interest rates start to drop in the first half of next year. It shows that as prices increase, so do loan amount, required contribution and repayments, despite a decrease in interest rates.
Assumptions
• Property prices increase by 4.2% every quarter
• Interest rates will start to decline in the first half of next year. Please note that some economists are predicting further rate increases https://business.nab.com.au/wp-content/uploads/2023/08/NAB-Monetary-Policy-Update-2-August-2023.pdf
• Required contribution includes an estimate of all costs including legal fees and LMI.
Please note these are only assumptions and will vary depending on your specific scenario.
Important Questions
The more important question is "where is a good area to buy?" Don't buy just anywhere. Do the research.
Why are you buying? What are your goals?
What to buy? Units, houses, land, etc - again, do the research.
How much to buy?
If you would like to discuss your loan options to buying or refinancing property, or would like to prepare for buying, please contact me via phone or email.