09.14.2022 Buying Tips

Could This Be The Perfect Time To Buy A Home?

Could This Be The Perfect Time To Buy A Home?

Most media reports about the real estate market are focusing on a market in decline.

That’s part of the reason this is the perfect time to buy.

The property market in Sydney’s eastern suburbs is certainly not what it was in the unprecedented frenzy of 2021. Gone are the days of record growth, frenetic open homes and almost perfect auction clearance rates. In their place is a market that has been much steadier.

The East has remained relatively steady, but it’s times like these, when the market is experiencing flatter, or even falling conditions across the city, that it often makes the most sense to take your next step on the property ladder. Here are seven reasons why now could be the perfect time to enter the property market.

1. You have more choice

Prices rise sharply when there is more demand than supply, and that’s exactly what we were seeing over 2021. For every home that was on the market, we frequently had nine or 10 genuinely interested parties willing to buy. This meant properties would sell quickly – often before auction or off-market – and many would-be buyers wouldn’t even have the chance to view them, let alone make an offer.

Today, it’s a different story. With generally less competition, you have more choice and you’re much more likely to find a property that suits your needs.

2. You have more time to get it right

You often won’t just have more properties to choose from, with less competition, you’ll also have more time to make a decision and get it right. That’s critical when you consider you’re likely to be in your next home for a decade or more. You’re also likely to find that vendors are more receptive to offers than they would have been 12 months ago, which means you’re also more likely to find the perfect home for the perfect price.

3. The worst of the interest rate rises could be over

One of the main reasons we’ve noticed people have been holding off either buying or selling has been the uncertainty around interest rates. With the RBA raising the official cash rate aggressively this year, many people have been telling us they’ve been waiting to see where interest rates eventually land. In other words, it’s not that they can’t afford to buy at current rates, it’s more that they want to see where it stops so that they can take stock and have some degree of certainty.

After September’s rise, the official cash rate sits at 2.35%. That’s back at 2015 levels but still below the decade-long pre-COVID average of 2.56% – so it may be high compared to the past few years, but it’s not high in the broader scheme of things.

While the RBA has also flagged that it’s likely to raise interest rates further ‘in line with data’, it’s unlikely that we’ll see the shock of interest rates being hiked up as rapidly as has already happened this year. Once we see the rate start to stabilise, we expect to see more buyers come out, and that could send prices back up again.

4. The gap between rungs on the ladder has shrunk

If you’re upsizing, it’s during markets like these that it’s actually the very best time to make your next move. That’s because the gap between properties has shrunk, making it easier and cheaper to take a step up.

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Say, for instance, you have a home worth $1.5 million, and you want to move into a home worth $3 million – a gap of $1.5 million. If property prices fall 10% across the board, your current home is worth $1.35 million, and the other home is worth $2.7 million – a gap of $1.35 million, or $150,000 less.

That means less shortfall you need to make up, less you may have to borrow and potentially more that you can afford.

5. The government is offering help

If you’re a first home buyer, the NSW government offers generous schemes, such as the First Home Owner Grant and stamp duty concessions. Meanwhile, the Commonwealth government offers the First Home Guarantee scheme, also aimed at helping people get into the property market for the first time.

While very few properties in our areas qualified for these at the start of the year, an increasing number of apartments actually are – at least if first home buyers are willing to start in a one-bedroom apartment.

For example, the NSW First Home Buyer Scheme – which offers a $10,000 grant – applies to properties valued up to $800,000. That’s close to the median price of a one-bedroom apartment in Potts Point ($830,000), above the median price of a one-bedroom apartment in Centennial Park ($726,000) and even above the median price of a one-bedroom apartment in Paddington ($795,000).

6. Investors are already capitalising

Warren Buffet gave us the famous advice to be “fearful when others are greedy and greedy when others are fearful”.

While many owner/occupiers are holding off transacting, investors have remained active. Many have been lured into the market, attracted by the prospect of adding to their portfolios by buying properties for decent prices that would have been in far greater demand six months ago. Investors are also being attracted by rising rents and much stronger yields than they’ve been getting over the past few years.

7. The long-term average is on your side

Finally, it pays to remember that property is a long-term investment. While the Sydney market has historically risen and fallen, the long-term trend has been for prices to rise, with Australian property recording average growth of 10.2% a year in the 20 years to 2017.

This means that rather than trying to ‘time the market’ you’re much better off buying – or selling – at a time that suits you.