We all know that there's never a 'best time' to buy property, and it's certainly not a decision to be rushed into. There's a lot of money, time and effort that goes into purchasing a property, and that should never be taken lightly. That being said, if you've been considering getting into the property market but aren't sure if now is the right time, this article is for you. We're going to outline the reasons now is a good time to buy property, which might be contrary to what the media is telling you right now.
Hot property market is cooling down
We're coming out of a pretty hot property market right now, so the interest in housing is starting to dwindle. While this isn't great news for those who are selling, this is excellent for the savvy buyer who is looking to avoid a huge crowd or intense bidding wars. Not that long ago buyers were complaining there were too many buyers and prices were reaching ‘stupid’ levels. If you’ve been out to any open houses lately, there are very few buyers out there. This means real estate agents are having to work harder to find buyers and when the demand drops, so do the property prices.
Home buying intention dropped by 21.5% in April and fell by 13.1% over the year. These figures are weaker than the average for the month as rising cost-of-living pressures and increasing interest rates rattled buyers, Commonwealth Bank of Australia’s Household Spending Intentions index shows.
CBA HSI Index - March 2022
CBA HSI Index - April 2022
The drop in buyers is reflected in a drop in property prices. For example, just 2 weeks ago, a four-level villa in Main Beach on the Gold Coast went to auction and was passed in at $2,100,000. The vendor wanted $2,800,000 and the agent had thought this was achievable given recent sales in the area. Turned out, the level of demand just wasn’t there. The buyer ended up purchasing the property for $2,300,000 – a massive $500,000 lower than the original price guide.
We’re seeing this happen particularly in the $1,500,000 to $2,000,000 price bracket in various locations.
You’ll notice a lot of real estate agents aren’t disclosing the sale prices on their sold listings, citing ‘contact agent’ for the sale price. This is because they have sold for under their expectation and they don’t want to promote the fact that the price was lower than the original expectation.
Fear of rising interest rates or property crash
If you're keeping up with any of the major news sites, you've no doubt seen plenty of fearmongering about rising interest rates or even the spectre of a property crash on the horizon.
The reality is that these are just that - fearmongering! There is no legitimate concern for the real estate landscape as it is now. We are in a correction period, where interest rates return to pre-pandemic levels. Remember, the RBA cash rate was 1.50% in December 2018 – do you remember the crash of December 2018? No, because there wasn’t one.
Pre-approved buyers have superpowers
For those who have a home loan pre-approval in place, choosing to buy now might be the best decision you make. Reason being, as interest rates increase the borrowing capacity assessment will change to calculate your ability to make repayments based on the increased interest rate. This means if you need to re-apply for your pre-approval because the previous one has expired, you may not secure the same loan amount.
Buyers who have a pre-approval in place are gold to real estate agents. In a cooling market, tyre-kickers just aren’t out and about at open homes, so agents know serious buyers are the ones with finance ready to go. This gives you superpowers and the ability to negotiate hard, as many vendors have already purchased elsewhere.
Quality properties hitting the market
Remember when there were hardly any good properties on the market…? That was literally only about 6-8 weeks ago. Sellers who have bought elsewhere have waited until after the Easter and ANZAC long weekends are out of the way, and have now listed their properties. We’re seeing a significant uplift in quality properties hitting the market. Unfortunately, those sellers will be disappointed as they have just missed the rush of ‘stupid’ sale prices.
Elections make people nervous
People tend to become nervous around elections, especially federal ones. A change in government heralds potential new taxes, regulations, tax breaks or incentives. Ultimately, until one government or the other is elected, people feel unsure. That translates to fewer people turning out on auction day and fewer people to get into a bidding war with. Consider that when you're weighing up your options.
COVID is 'cooling down'
Now that Australia has settled into a manageable COVID response, people feel that we're moving into a post-COVID 'normal' way of life. This is producing a lot of buyer confidence as people see now to be a good time to invest, with health and employment being far more stable now than in the previous few years.
When does the property market go quiet?
If you're looking for more properties with less competition, avoid March through to May, as these tend to be busier times. Having said that, the times before and after the Easter long weekend are very quiet, so this could be seen as a boon or a curse depending on how you are looking at it.
Despite all of this advice, it's important to consider the property market on a micro level. While all of Sydney might be moving into a post-COVID 'normal' state, that doesn't mean all suburbs will be performing the same. The real estate market of, for example, a marginal seat in the Federal election will be much more turbulent and might be subject to a lot of fluctuations. All of this to say, be careful when making a property investment and discuss it with experts you trust and respect.