Is Now A Good Time To Buy Property? - January 2022
January 25, 2022 / Written by Rich Harvey
Change and uncertainty feel like the only constants at present. Just when we think we’ve got things under control, they wriggle free and take on a life of their own.
The pandemic is a prime example. Anyone who’s watched those political briefings can see our leaders are reacting on an almost daily basis to the challenges and shifts.
And it’s had flow-on effects to our property markets. For example, at the start of 2020 there were cries of doom with many expecting real estate values to plummet. 24 months later, and a FOMO-fuelled rush delivered a record year in 2021.
But does that mean the good times are over and you should now put off purchasing property?
The state of the market
There are constant pulls and pushes on the property market causing confidence to rise and fall. Normally, we can rely on historical evidence to indicate where prices will go over a given time frame. But at present, it’s a little more difficult to make forecasts because circumstances change rapidly.
If the Christmas/New Year period taught us anything, it’s that one week can be vastly different from the next in terms of COVID. As at the time of writing, for example, New South Wales is recording rising fatalities, but falling case numbers. This puts us in a precarious position regarding community confidence. Personally, I believe we’re constantly learning to adjust to a COVID world, and this will only get easier as the year progresses.
Then there’s the economics of Australia. For example, in January the unemployment rate dropped to 4.2 per cent – a great result but a figure that could change either way depending on how the outbreak progresses. Will this low figure be sustainable? Probably, given the level of demand for workers at present.
Then there’s interest rates and inflationary pressures. Australia is well positioned to enjoy a strengthening economy, but if interest rates do rise, I suspect it won’t be by much or particularly quickly, so the impact on property will be minimal.
Other factor to watch will be around the Australian Prudential Regulation Authority and its directives to lenders. They’ve already taken some steps to kerb lending through higher serviceability buffers. I wouldn’t be surprised if more directives were issue which are designed to slow investor activity to the benefit of first homebuyers.
There are the benefits of borders reopening too – both domestic and international. The free flow movement of Australia’s population helps industry flourish. Then there’s overseas arrivals such as travelers, new residents and students. Their numbers will swell this year and their need for shelter could well see an uptick in demand, meaning increased values and rents in particular sectors.
What are the headwinds facing buyers at present too?
Well, available stock remains a problem across most price points. Owners have simply resisted listing – often because selling a home and then buying another in a rising market can be risky. In a worst-case scenario, you sell out and then can’t afford to buy back in before prices shoot higher.
On the flipside, some in Sydney believe the market has peaked. We are seeing an increase in vendors listing their properties to catch the best possible price before the cycle turns. This rise in stock number would normally slow price growth.
Still, finding a great home within your price point and location remains a challenge if you aren’t well connected and don’t devote plenty of time to sourcing and research.
So, we have all this intel about the market, but I can still hear you ask the question, “Is now a good time to buy?”
My answer is, ‘Yes’ for one simple reason.
Real estate is an asset with excellent long-term growth potential. Smart buyers know that short-term challenges and hiccoughs should not stop you acquiring property if it offers the right fundamentals. If you are making ‘yes/no’ decisions based purely on short-term fluctuations in the market, then you need to rethink your approach.
Take a look at the Australian Bureau of Statistic’s Residential Property Price Index over the past 10 years:
Notice something? It shows fairly consistent value increase across the decade.
Extend that data out 20 years, and you will see that despite the ups and down, those who bought property in 2000 and held onto it couldn’t care less about the short-term fluctuations.
In the year 2000, the Sydney region’s median house price was around $325,000. Today it’s approximately $1.5 million.
People who bought in Sydney during the ‘market downturn’ in 2017 have seen more than 30 per cent in capital gains since then – even greater if they bought the right type of asset.
Time in the market takes care of the bumps, and even forgives a few bad decisions.
So, reset your thinking because now is an excellent time to buy a property if it suits your needs, resources and goals. Waiting to buy will only bring regret.
Don’t listen to negative media and dour commentators predicting plummets because they are reacting to what’s happening right now, not what will happening over the next two decades.
Instead, talk to a professional in the field who can give you measured, level-headed advice about your buying decision. A buyers’ agent can help you source a property that can ride out the tough times and deliver exceptional long-term value growth.
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