Is It Worth Holding Off Until Next Year? - June 2022

By Guest Blogger, Daniel Gold, Finance Broker

Long Property

I get it… the media headlines are scary, interest rates are going up, and some experts are predicting a 10-15 per cent fall in house prices!

So, delaying your next property purchase, or at least pausing your search for six months, makes sense, right?

I actually have a number of clients very keen to buy now. Here are some of their reasons…

By waiting, the loan they qualify for might get reduced

• My recent analysis suggests a 1 per cent rise in interest rates reduces borrowing capacity by approximately 10 per cent
• The amount they’re pre-approved for is irrelevant, it’s the amount they qualify for once they’ve actually purchased which dictates how much they will be able to borrow
• Consider the impact a loan reduction might have on their budget

They’re not up against much competition at the moment

• From what I’m seeing and hearing, buyer enquiry is now well down on last year, and loan volumes are down too
• How often does one get to buy well located residential real estate in Australia with minimal competition?
• It only takes one or two others in a competitive setting to start driving up the price, and/ or to reduce the likelihood of being successful in a negotiation or at auction
• What happens when all the buyers return?

Buying conditions in many areas have become favourable

• I was having a chat with Rich Harvey (regular media commentator and founder/ CEO of propertybuyer) late last week and he mentioned a few things worth sharing…
• He said construction costs have risen substantially which means that less properties will be building in the coming 2 years – thereby lowering supply

Rents are rising at their fastest rate in three decades. This means the yields for investors are rising, and for home buyers sitting out of the market means they will end up paying more rent

• Rich said that during the past few months during his usual round of inspections and auctions, there is much less competition – less buyers at inspections and the volume of bidders has dropped dramatically. He said agents are wanting to wrap up deal’s pre-auction. Rich said he has already seen prices come back 7% to 10% in most areas.

For everything working against the property market at the moment, there’s some good news too. Wages are rising and Australia's unemployment rate has dropped below 4 per cent for the first time since the mid-1970s.

Households accumulated c $240 billion in savings during the pandemic, and on average borrowers are ahead on their mortgage repayments by about two years [1]. The economy has strength, and most consumers have a healthy balance sheet (or are ahead on mortgage repayments).

It’s not easy finding a great property. But for those who do, if they’re not overstretching, and if they’ve got a longer-term view, then I can definitely see the sense in transacting while the market takes a breather.

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[1] Households have prepared for incoming rate rises: RBA, Money Management, 4 May 2022

Daniel Gold is an investment savvy finance broker specialising in residential real estate. He is a rising star in the industry and for the past several years has been recognised by Mortgage Professional Australia as being one of the top mortgage brokers Australia. Visit www.longproperty.com.au

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