Buy or Wait? What You Need to Know about Property in Sydney
When is the right time to buy a property in Sydney? Should you wait longer, or is now the right time?
Domain’s June House Price Report showed that for Sydney properties, price declines have slowed. Furthermore, August started showing signs of Sydney property market actually rebounding from the biggest price correction since the 1980s. So if you’re still waiting for the right time to get into the market, you could be waiting for a long time.
Will House Prices in Sydney Drop Further?
Since 2017, Sydney’s prices dropped by 14.5% before gaining by 1.6% in August. Core Logic’s Head of Research Tim Lawless says, “The August figures really have taken quite a step change upwards, which is a much stronger rate of growth than what we would have expected”. But analysts caution August’s sharp bump is not necessarily the beginning of a fresh boom.
As of May 2019, home prices were at their lowest level since 2017, and as of June 2019, home prices in Sydney had started to rise for the first time in two years. This is a great time to buy a property, by any metric.
Up until now, prices in Sydney had been lowering due to economic downturn. But there are a few important reasons to believe the Sydney market has likely started recovering:
- Lower interest rates. Interest rate cuts mean improved affordability: first-time home buyers can pay less for a new mortgage, which in turn boosts the market. Combine this with the Coalition government’s First Home Loan Deposit Scheme, you have a great opportunity to break into the market.
- The Coalition government. To the surprise of many, the Coalition won in the elections. This means the housing markets are picking up. There is stability in the government and zero changes to negative gearing and CGT. For you, this means the time to be sitting on the sidelines is over. For investors, this means confidence and certainty.
- More general competition. With home prices still lower than they were just two years ago, more buyers are likely to begin entering into the market. As this happens, demand outpaces the supply, and each individual property becomes more expensive.
- High auction clearance rates. Sydney captured the title of the best-performing capital city after auction rates jumped to 78.2% in August. With historical data indicating there are 40% more auctions held in spring than winter, auction numbers are likely to increase, giving a good indication of the market condition.
While it’s tempting to wait to see if the market stabilizes or falls any further, it’s also possible for the market to outpace the buyers.
The more home prices fall in Sydney, the more buyers are going to enter into the market. The more buyers enter the market, the faster prices are going to rise. And the more quickly home buyers may find themselves priced out of the market.
You have to not only time the market, but also the competition.
Whether the market will drop further before bottoming out is debatable, but what isn’t debatable is that a large amount of the value from 2017 is likely to be recaptured with time. So it’s not so important that you make your home purchase when the market is at its bottom. It’s more important that you get into the market at all.
The Smart Move: Don’t Wait Too Long to Buy a Property in Sydney
Spring is commonly the busiest month for home sales. Economists and experts are expecting that spring will see a rise in property prices, especially due to the reduced interest rates.
You have more borrowing power now than you will later, especially with APRA’s updated guidelines on serviceability requirements for borrowers.
Those who hesitate to get into the market may yet see themselves being priced out of it. Property in Sydney is still very high in value, with the average property price reaching below $1 million at $989,000. Any buyer who is already close to being priced out — who has limited capital for a down payment or who is already on the verge of not qualifying — needs to get into the market now, before they potentially lose their ability to qualify.
You may need to purchase smaller properties, such as starter homes, with the idea of getting into the market, building equity, and purchasing a larger home later on.
Additionally, even with the lower interest rates, banks may start to tighten up their lending restrictions. Find out now whether you can qualify to make a purchase and how much you qualify for.
Don’t Enter the Property Market Blind
The home buying purchase can be complex, especially in a market like Sydney. It’s understandable that many are worried about buying into a falling market, and many are concerned about potentially being left underwater in their homes.
However, like stocks, short-term rises and falls in the real estate market don’t usually have a long-term impact on the property’s value.
Property generally holds its value tremendously well, and short-term fluctuations only impact people who are buying and selling short-term
Don’t enter the property market blind. You can get expert, professional help from Shore Financial.
A mortgage broker can help you in many ways: better negotiation, larger borrowing capacity, and sound advice regarding the current market temperature.
Speak to an expert at Shore Financial today to find out more, and subscribe to the blog for additional information and insights regarding the purchase of your first property.
Disclaimer: This is general information only and should not be taken as financial advice. Please speak to a Shore financial planning professional before making a decision on your home loan.