Buying in Sydney used to be relatively simple, it was generally a case of buy as soon as you can and get whatever virtually fell within your budget. You’d never really worry about the rest because the market typically always took care of it.
However, given the spate of tax incentives, grants, lending criteria – it’s no longer a simple 1+1=2 formula. Buying a home takes some good nous, a little bit of luck and lot’s of planning and informed decision making.
Within a slowing market it’s even more dynamic, so According to Jason Murphy of news.com.au, he’s suggested some salient rules to help you navigate through your options.
Don’t wait for ever. Markets fall for a while and then they turn up again.
If you read a bit about the Australian housing market you know by now all the reasons why housing might be overvalued: low interest rates, high greed, insufficient supply, rapacious banks lending way too much, and the belief housing only ever goes up.
But don’t forget there are a lot of balancing factors that will most likely prevent Australia’s housing market from having a crash in the style of Spain or Detroit:
● First home buyers are on the sideline and they have been saving hard for years. Some big deposits are out there lurking
● Chinese buyers are out there looking for options cheaper than, say, Canada
● Banks can cut interest rates to help people borrow
● The RBA can cut rates if things get really bad
● Our financial system is strong so even if prices drop, you can’t expect a banking meltdown to accelerate the downturn like we saw in the US.
All this means a housing price fall in Australia is unlikely to become the extended, five-year, 40 per cent crash first home buyers dream of at night. Waiting too long can be more expensive as waiting too little.
You can never time the market perfectly. Give up on it. Only one person buys at the absolute bottom. Getting a bit closer to the bottom than if you bought now is the best you can hope for.
Remember above when I said: “So long as the market is slowing, you should stay cool and calm.” The thing is that you never know what the market is doing right now. At best you know what it was doing last month. If it starts to turn up, it will be a while before you realise.
Also, there is an old principle in investing: time in the market beats timing the market. If you decide to wait and the prices start to rise while you’re sorting the loan out with your bank, you’ll feel plenty of regret.
Do your research. And not just online.
You know the places that look so appealing on the real estate sites? Lots of other people also think they look good. They’re probably beautifully presented, underpriced, or both. There will be a lot of competition Don’t rule out the ones that seem unappealing online.
Research puts you in a very strong position. The housing market is not perfectly harmonised. It is not like the market for biscuits at Coles where prices and products are uniform all the time. Some weekends, a house sells at a crazy high price, and some weekends a place sells at a crazy low price.
Just because the market overall is doing one thing doesn’t mean a particular house won’t do something totally different. You can catch a bargain by paying really close attention. Look at a lot of houses. Strike when you find a good one.
If you want to buy a house to live in now, buy a house to live in now.
Say you will own a house for 20 years, one year is five per cent of that time. If you buy now and the house loses five per cent of its value, just remember that you got a lot of value by living in a house of your very own for a year. Are you really that far behind?
If you do buy now, don’t obsessively read about property prices again for a couple of years. Beating yourself up for missing a drop in property prices will be totally unproductive. You can only make decisions with the info you have at the time. Most people buy at what seems like the “wrong” time. You’ll make yourself cross if you obsess on that, especially because in the very long run, property will probably rise again.