If You Can Handle The Interest Rates, Relief Is Finally Here For Buyers

The normalisation of property prices has been a trend over the last 12 months in Australia, but we’ve finally got data that confirms the dynamics – CoreLogic Data shows that overall, property value has dropped by 7.9 per cent for the year.

This is the largest decline in property values on record. It also means that in over 200 suburbs, the median value of a property has dropped below $1 million.

For Australian buyers that have struggled to raise the deposit needed to buy a home – especially first-home buyers – this will be a relief. With the minimum deposit to be approved for a mortgage being recommended at 20 per cent, simply saving the money for a million-dollar house has always been an affordability challenge. The required up-front sum is now easing.

For some, this has of course been offset by the interest rate rises, with it now sitting at 3.60 per cent, and likely to go a little higher still. This does mean that the monthly repayments on a mortgage are increasing, which is another affordability challenge. However, this is offset slightly by the cheaper property stock available, and Australians that can afford to buy in at the current rate can expect that whatever the peak of the interest rate will be, it won’t be too much higher than where it currently sits.

In other words, there is some certainty about what a house will cost buyers now, and conditions are good for those Australians that have good jobs and stable incomes. Now is a good time to buy that dream property, before property value inevitably starts to increase again, and before confidence in this new, higher interest environment starts to encourage more people into the market again.

What you need to know about buying property in the current market

While buyers should feel optimistic about their ability to secure a property for a good price, there are a couple of things that are important to keep in mind as you search:

1) ? ? Builders and material supplies are expensive. A “fixer-upper” is going to cost you more now than it did before, and, depending on the nature of renovations or repairs, you may need to wait a long time to be able to get started on a project. Where possible, you should be looking for properties that have a minimum of critical work needed.

2) ? ? Having a real-time understanding of property values in the area is critical. The decline in property values is rapid, and one of the common strategies that you’ll see from agents in the current market is to reference historical price data in an effort to make the property seem like it is valued higher than the real, current value. Make sure you research the area thoroughly before starting a property search, and continue to update yourself on the real-time value of property in the area.

3) ? ? Make sure you’re securing a top-tier property. The best quality property will be the ones that gain value quickly as the market turns back towards an upswing. To be placed to take the best advantage of that, make sure that you’re buying a property that is well served by the local amenities, and that you’ve looked into where federal, state, and local spending into the community will go so that you can draw a picture of how the area might be shaped in the longer term.

4) Look for a property with long-term growth potential. An ideal property will be one that is immediately livable (whether it’s an investment or a home) but also offer the opportunity for light cosmetic renovations over time to improve its value, or offers the opportunity for future development play (such as the ability to add a granny flat or a possible subdivision). These properties will allow you to, longer term, manufacture equity and outperform market growth.

With the interest rates currently high and the cost of living escalating, there are fewer people currently looking for properties. This window won’t be open for long, as the market and buyers adjust to the new circumstances. For those that are able to afford the (now smaller) deposits and can enter the market at the current interest rate, it might prove to be the best buying period Australia has for some years to come.

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