Confused about when to buy property? Follow this expert advice to help you make sense of the market.
The Buyer’s Puzzle
It was only a year ago that The Economist published a report with Australia as the most overvalued house prices in the world. Hardly an encouraging indicator for your average house-hunter.
Many of the commentators of the Australian housing market have an interest in claiming that the Australian property market is kosher. The rosier the outlook, the more money in their businesses to their back pockets. So really, should we listen to what they have to say?
A Long Wait
It is now four years out from the Global Financial Crisis, and there hasn’t been any sign of an apocalyptic house-price bubble burst here. How long can we wait?
This is why many experts go cross-eyed when put on the spot by journalists. ‘Is it a good time to buy?’ is such a natural question, one the experts wish they knew themselves.
The real estate market is one where the pointy-headed economists struggle for relevance. While other aspects of finance are powered by a minority of finance experts (who control decisions to buy and sell), housing prices are controlled by the mum and dad masses. People are likely to buy property at a particular junction in their lives. Moments will arrive largely irrespective of the property cycle. Luckily for you, timing investments isn’t as important as time in the market.
So what do the masses think?
According to Genworth, 49% of Australians say now is a good time to buy. The CBA/MFAA survey of first home buyers found 63% think it is a good time to buy due to low interest rates and value property finds.
How do I buy a home and not lose money?
1) Buy a Property with the next 8 Years in Mind
Buy a home which will suit your needs years from now, not just in the first two years of ownership. This will give you time to earn capital growth - and will hedge against the risk of property cycles.
If you do choose to buy a property which you know won’t suit your needs in the medium term, you’d want to ensure that the property has strong enough rental demand and yield in order to hold onto the property as an investment.
2) Buy a Sound Structure
Even in this market, builders aren’t cheap. Inexpensive value-adding DIY renovations rely on a solid structure.
3) Do your Homework (or pay someone else to do it)
There are no prizes for blowing a lifetime’s worth of money on a dud investment. A home needn’t be a gamble. Knowing that you are getting a home for the right price with no hidden surprises, that is affordable to you, is essential. You should revise your wills and insurances at this time to ensure you are covered for mortgage repayments in death, injury and poor health.
Written by Jeremy Cabral, Publisher of top home loan comparison website, www.HomeLoanFinder.com.au, a free website which aims to help consumers make informed choices when selecting a home loan.