For Aussies looking to enter the property market, you’ve likely become accustomed to hearing (or feeling) that the Great Australian Dream of home ownership is merely just that…a dream. Although the sense that owning your own property may feel impossible, that didn’t stop determined Aussies looking to secure their slice of heaven with property sales in 2021 smashing purchase results from 2020 by more than 40%.
In 2022, a different picture is being painted for home buyers looking to enter the property market. In what is already a confusing landscape to navigate, how do you decide if now is the right time to buy? We’ve put together our top 3 tips for home buyers in the market who are ready to utter those three glorious words, “home sweet home.”
After the property buying boom from the last 2 years has started to slow down, it has likely come as a relief that house prices have also been seeing a steady decline since June 2022. For new home buyers, the reduction in house prices is welcome news after a lengthy period of house pricing feeling like an ever changing and unreachable target. But with interest rates on a sharp trajectory to increase over the coming months, buyers need to be aware of how this could affect upcoming plans and borrowing capacity.
So why the interest rate rise? In short, it all comes back to a lack of supply and heightened demand. As the population starts to return to normal activities, consumer demand has also begun to return to pre-COVID levels. However, multiple factors such as extreme weather events, i.e. flooding, the war in Ukraine and slow supply chains have all contributed to the cost of goods soaring such as food, fuel and energy. Interest rates are increasing to help to stem the economy and bring the price of goods back down to an affordable level.
Where there’s a Flo Rida song, there’s a way! Whilst the rising interest rates may act as a deterrent for Aussies keen to take advantage of lower property prices, there are things home buyers can do to remain vigilant in a volatile market and increase your chances of owning a home.
By casting a wider net and shopping around in other suburbs, you may find different areas have properties that tick all the boxes you’re after for a lower price point. You may wish to take advantage of the declining property prices and allow yourself a financial buffer to ensure you avoid mortgage stress and are able to meet your financial obligations. Although this may seem like an obvious suggestion, we recommend spending a few hours after your property viewing getting to know the neighbourhood. Have a walk around and see what the area has to offer, meet the locals and sus out where your potential new coffee joint might be.
‘Compromise.’ It’s a word we don’t like to hear, but if you can finally hang that picture frame on the wall without having to worry about losing bond money…it’s totally worth it! As interest rates rise (and are predicted to continue in that direction until mid-2023) your borrowing capacity for a home is likely to reduce significantly. If you simply don’t have the means to boost your deposit quickly, expanding your search to seek out smaller or alternative property layouts that could suit in the short term.
For example, whilst a townhouse or a unit may not offer the backyard and garden space you might be seeking, consider if surrounding parks and neighbourhood facilities could act as an alternative in the short term. And remember that once it’s yours, you can always renovate and bring your vision to life.
Loyalty is a two-way street, so whether you’ve been with your bank for years and years (everyone still remembers ‘Dollamites’ right?) or have recently made a change, it may be worth investing time to search for a better deal. If you aren’t confident in navigating the financial waters independently, have a chat with a Mortgage Broker or a financial consultant about what will best to suit your situation. Besides, if you’re already prepared to switch baristas why not consider making the move to another bank? Particularly if it’s going to serve you in the long run.
We know that saving for your home deposit is a long, tough journey with countless, unpredictable obstacles thrown at you along the way.
