House prices are tipped to fall in the medium term, but experts warn potential buyers not to focus on trying to pinpoint the bottom of the market.
Instead, anyone lucky enough to be in a position to buy would be better served trying to purchase the best quality home they can afford, regardless of whether prices are going up or down, giving them an in-demand product once it comes time to sell, buyers agents say.
“It’s one of the most common questions that we get when we sit down with clients,” Wakelin Property Advisory director Jarrod McCabe said.
“When is a good time to buy?”
The question of timing is in focus as the Reserve Bank prepares to lift interest rates from crisis-era levels, a project it once scheduled for 2024 at the earliest. But the economy has improved faster than expected, and the governor on Wednesday signalled a 2022 hike was possible, although he stressed the board’s preparedness to be patient.
Several economists expect the cash rate could rise as early as the second half of this year, or in 2023, and forecast property prices could rise gradually until that point and then dip modestly, perhaps by single digits.
Rising interest rates could put downward pressure on the property market.CREDIT:PETER RAE
Any fall would be eagerly anticipated by home-buying hopefuls who have watched prices soar to record levels over the past year. Home values have risen 25.5 per cent in Sydney over the 12 months to January, 14.9 per cent in Melbourne, and 22.4 per cent nationally, CoreLogic figures released on Tuesday show.
Industry veterans have watched potential buyers get burnt in previous cycles by trying to pick the bottom of the market and getting caught by a fast price rebound.
Buyers agent and chief executive of Propertybuyer.com.au Rich Harvey has seen some “unfortunate horror stories” in the past two years, after prices were forecast to deflate as the pandemic hit. Instead, prices fell by single digits and then reversed.
In one example, sellers two years ago thought they got a great price and could wait to buy back in, but ended up waiting too long and are faced with buying outside of Sydney or buying an inferior house in the same market.
“They’ve done themselves out of half a million to a million dollars of equity,” he said.
Rose & Jones buyers agent Stuart Jones remembered a vendor on a high salary who sold in 2015 and rented, banking on a correction.
“By the time the market corrected in 2017, he’d priced himself out,” he said.
“He’s still renting now… lots of people get it wrong.”
Property takes longer to transact than shares, as buyers usually need to get home loan pre-approval, find a home they like, go to auction or make an offer, and if they miss out to a competitor, repeat the steps. Within a few months of searching, prices might have turned.
For a long-term purchase such as a family home, likely to be held through a number of market cycles, Mr Jones urges clients to focus on the asset, not the timing.
“Buy the best possible property you can with the budget you have,” he said.
For example, a home that is light, with an efficient floor plan, with parking, near amenities such as schools and parks, in a low- or medium-density neighbourhood that has hard infrastructure offering access to the city centre even from suburbs further afield.
Mr Harvey adds a vote for buying a home that will grow with a growing family, or a low-maintenance property for a downsizer. Avoid homes on a noisy main road or next to a petrol station, he said.
Mr McCabe recommends a home with strong underlying land value and a good orientation. For investors, he suggests a property that will suit the demands of renters, regardless of the owner’s likes or dislikes.
And what of the opposite risk: purchasing at the top of the market on a low deposit and being forced to sell shortly after into a falling market due to unforeseen hardship such as divorce or job loss?
Markets such as Perth, where house prices peaked in 2014 and have not yet recovered, are a reminder that property prices can fall. And banks now insist borrowers plan for higher mortgage repayments once rates rise.
“The best way to insure yourself against that risk is to buy well,” Mr Jones said.
For example, he cites the difference between a family home close to transport and one further away, or a five-bedroom home with four children’s rooms on one level and a master bedroom on the ground floor compared to a five-bedroom home with three upstairs and two downstairs.
“When the market capitulates, you’ve got a saleable product,” he said. “There’s always somebody who’s trading up or trading down.”
Article Source: www.brisbanetimes.com.au
from Queensland Property Investor https://ift.tt/27etU4f
via IFTTT
