“Uncertainty ahead”, but buying a house now is still your best move

New data on housing prices confirms what we already knew: the market is correcting and house prices across the country are softening. In some markets, it’s happening quite rapidly.?

The data shows that in every city (but Darwin) property values declined, and in Sydney, the rate of decline has been almost $1,000 per day.?

And according to the data researchers at CoreLogic, this trend is going to settle in for a while. Research Director, Tim Lawless, attributed much of this trend to ongoing efforts by the RBA to combat inflation. As a result, this is something that’s going to continue for some time to come.?

“It’s hard to see housing prices stabilising until interest rates find a ceiling and consumer sentiment starts to improve,” he said.

“From current levels, interest rates are likely to increase by at least another 75 basis points and there is a good chance advertised stock levels will accumulate through the spring selling season, providing more choice for buyers and adding further downwards pressure on housing values.”

However…

For buyers, it might be tempting to see if property prices can continue to fall, holding off purchases until then. There’s another dynamic at play in the market that might offset that, however: The cost of builders is accelerating rapidly.?

As a report notes, the cost of building a new home has increased by 25 per cent since the pandemic started. However, with inflation being such a runaway force, many builders have found themselves working on contracts that have now dated to the point that they’re not making money from their work.?

Those that survive (and the prediction is that some builders will go out of business, resulting in less competition) will be increasing their costs for new projects. This will most significantly affect the cost of new buildings, but it will also increase the cost of repairs, renovations, and other works on existing properties.?

In other words, if the Building & Pest inspection tells you that you need to replace the decking or some walls, or if you’d like to make some changes to the property via a renovation, it could become much more expensive than you had anticipated.?

What can be done about this?

Firstly, you should do the Building & Pest inspection on a property as early as possible, so you know whether you will need to speak to builders and get their quotes to consider with your offer. Make sure that you are satisfied with the thoroughness of the report, because it won’t take much for repairs to add tens of thousands of dollars to the price you pay for the property.?

Secondly, make sure you have good builders lined up ahead of time. It is a stressful time for them, and they are being simultaneously squeezed by the need to take on more projects, with shrinking margins. As we highlighted in a previous blog, one of the areas we’re adding a lot of value to our clients right now is our ability to understand real building costs quickly and enable buyers to make value decisions accurately and quickly - that way they don’t miss out on any opportunity.

Assume that the cost of builders is going to continue into the short term. A combination of materials shortages and inflation is behind it, so as long as inflation is causing property values to decline, it’s going to cause construction costs to increase.?

Be buyer ready! Our recently-launched course will help you understand how to best-run inspections of the property, and use those to help decide whether the property is for you and how to use inspections to arrive at the ideal offer for your dream home.