Times are changing, and as the economy fluctuates so does the property market. Whether you’re an upgrader, first home buyer or property investor, it’s important to know that the housing market is cooling. In fact, it’s even more important to know what it might mean for you and your situation. Who knows – it could just help you decide what your next big move on the property market will be.
What is the current state of the Australian property market?
The housing market has taken a downturn as interest rates have risen, with vendors needing to sweeten the pot for prospective buyers by lowering their price expectations. While some experts say the sharp fall in housing prices will be contained within a 12 month period, the forecast is followed up by a warning that the market will likely take years to recover.
AMP Capital chief economist Shane Oliver has updated his forecast predicting the cash rate to peak at 2.85%. There is a chance it could climb to 3% and cause an even more drastic drop in housing prices.With that all being said, let’s get stuck into the considerations for different types of buyers in this cooler climate for the housing market.
What should home upgraders consider?
The short version is that now is a great time for home upgraders. Let’s say you’re looking to upgrade from a $1 million home to a $2 million home within the same market, but because the housing market is cooling, your home has dropped in value by 10% to $900,000. While you may initially see this as a bad thing – $100,00 less – it also means that your dream property has dropped by 10%, taking it down to $1.8 million and leading to a $200,000 saving.
In addition to this, you’re also saving on the variable fees associated with selling and purchasing a home – agents commissions and stamp duties will cost less.
What should first home buyers consider?
In the current landscape, you have far less competition in the property marketplace, so this is an immediate plus. In the last several years we’ve seen record numbers of potential buyers show up to in-person auctions, with some auctions garnering crowds of even up to 100 people. Nowadays, with auctions averaging maybe 4-5 attendees and only two of those being serious bidders, it is well and truly what we would call a ‘buyer’s market’.
Over the last few years, we’ve seen vendors really have the upper hand during the seller’s market. In a cooling market, buyers are given back the opportunity to negotiate price, terms, and a whole lot of things.
What should property investors consider?
Whether you already have a decent portfolio or are just starting out with property investment, now is a great time to get into the market and a great opportunity to take up long-term investments.
While many might feel scared off by the climbing interest rates we’ve been seeing, it’s actually a great time to revisit properties you may have looked at 6-12 months ago and see where they are in the market. If they didn’t sell, they’re in all likelihood going to have dropped about 10% – 15% in price, providing an excellent opportunity for you to buy up something you maybe once had your eye on but was too far out of scope at the time.
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