Is now a good time to buy?
Recent back-to-back interest rate hikes have led to a cooling of the property market, and with more rate rises predicted, you may feel like pumping the brakes on purchasing. But could the current climate offer opportunities?
With the predictions of coming rate rises and falling house prices, it’s not surprising many potential buyers are holding off.
But if you’re ready to buy, now could be an ideal time to strike – with other buyers holding back you could have more homes to choose from, less competition and more bargaining power against the vendor.
It’s a sentiment that’s starting to show in polling, with the Westpac-Melbourne Institute Index of Consumer Sentiment lifting by 3.9% between August and September – the first increase in the index since November last year.
Similarly, CommBank’s Household Spending Intentions index showed a 10% increase in home buying intentions this past month.
So if you’re ready to buy, or you’re on the fence, read on. We’ve outlined why it could be a good time to do so.
Less competition
Competition has been fierce and housing supply limited over the past few years, leaving slim property pickings for many.
But recent rate rises and inflation have made potential buyers hesitant.
We saw this in auction clearance rates at the opening of the spring buying season – typically a busy time for sales.
However this year the combined capital city auction clearance rate is sitting at 62%, according to CoreLogic, down from 74% a year ago, and a peak of 80% in March 2021.
And a softer market may not only mean less competition on auction day, but more choice and time to comprehensively evaluate properties without jostling with other contenders.
Less competition also means the power balance has shifted to the hands of buyers, which brings us to our next point.
It’s a buyer’s market
Are you ready to rock and roll with your finances? Then you could be in a position to negotiate on price and terms.
CoreLogic data shows fewer people are buying, with properties now sitting on the market for longer. In the three months to August, median days on market shot up from 20 days to 33.
Vendors want sales and are anxious about moving their property.
If you’re prepared to negotiate, consider targeting properties that have been on the market for a while – you may land a good price.
Prices are falling
Property prices dropped 1.6% in August, the largest national monthly decline since the 1980s. And ANZ economists are predicting a 15-20% drop next year.
But once those prices bottom out, you’re likely to face stiff competition – with plenty of other would-be home owners flocking to take advantage of relatively low prices.
And as we know in the property world, what goes down must come up, with prices expected to recover in 2024.
So if you’re ready to buy and want to take advantage of falling prices, sooner may work better than later.
Get ahead of interest rates
It feels like another month, another rate rise. The RBA recently hiked interest rates for the fifth month in a row. And the RBA governor has indicated more rate rises to come. It may seem odd, but buying now could be of benefit.
You see, lenders assess your borrowing capacity at an interest rate of 3% more than the loan you’ve applied for. That means as rates go up, the hurdle you need to clear for loan approval increases.
In other words: your borrowing capacity falls.
So getting ahead of rate rises now may make for a smoother loan approval process and higher borrowing power.
Come and speak to us
There’s no denying that picking the market can be tricky.
But finding the right home can be trickier, and you just never know when it’s going to pop onto the market.
So if you see a home you like and it’s in your buying range, get in touch today to find out your finance options and borrowing capacity.
We can help take care of the finance side of things, while you concentrate on the house hunting and negotiations!
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