Nineteenth-century American writer and wit Mark Twain once said: “Buy land, they’re not making it anymore.”
Over our decades in the property and loans business, we’ve seen huge increases in property values, occasional declines, eye-wateringly high interest rates and rates that could hardly be measured.
And while the Mortgage Broker Group will never make promises about the future, we do know that as a mid- and long-term investment, property has historically been a stunning bet in Australia.
For most people, though, buying a place to live is just that: a place to live first and foremost. The neat capital gain is just an added benefit for those lucky enough to get into the market.
A step into the (economic) unknown
Buying a property is always a balance between up-front affordability, longer-term repayments, personal circumstances, and market movements. Right now, with rates continuing to climb, we are seeing average property prices stall – and even drop a little – in the nation’s biggest markets. In fact, aside from Darwin and regional South Australia, Australia has seen an average decrease over the past month or two. August saw the largest month-on-month drop in average property prices across Australia since 1983!
These are averages, mind you. Some areas are still seeing small increases. But statistically speaking, this is the best time to buy in several years.
But what about interest rates? The recent increases have been fast and furious, and there’s probably more to come. But typical lending rates are still comparatively low. Variable rates are typically below 4 per cent. Excluding the past few years, you’ve got to go back more than 60 years to find a better rate.
Inflation is also a worry. Aside from the spike associated with the introduction of the GST, it hasn’t been this high since 1990. But the Reserve Bank hopes this will start to decline soon on the back of higher interest rates.
So … what now? Is it a good time to buy?
Impact of rising rates
As rates rise, potential buyers get worried for two main reasons:
- Higher rates mean higher repayments. In an age of static wages and increasing inflation, borrowers need to find those extra dollars somewhere;
- Increased rates usually lead to a slow or even drop in property prices. Nobody wants to be like the US during the Global Financial Crisis, where your debt is worth more than your property.
No one is predicting that kind of result here, but nobody wants to buy at the top of the market either.
But unless you’re looking for a very fast, get-rich-quick property flip, there has yet to be a ‘top of the market’ in Australia. It’s a bit like that proverb about planting a tree: the best time was 20 years ago, and the next best time is today. If you can afford to purchase a property, now is almost always better than later.
A buyers’ market?
It’s all about your personal situation. Are other debts under control (including credit cards)? Do you have a steady income? Can you show a good savings history?
Some things seem to be finally falling in favour of first homebuyers: There’s still a government grant, jobs have never been easier to come by, there was a recent 5.2 per cent rise to the minimum wage, lenders are offering low-rate no-frills loans, and new house-and-land packages continue to open up in growth areas across Australia.
Even investors are still in the game, with rents still red-hot, and some buyers keen to take advantage of the cooler market to nab a bargain ahead of likely future price increases.
Getting on the first rung of the property ladder is the hardest step. The next few months could represent a golden opportunity start your steady climb.
Talk to us
Be prepared. Maximise your chance of getting the best loan for you by letting us help you get your paperwork in order. We know how lenders work, and can help you find your ideal loan, fill out the application paperwork, and secure pre-approval.
The Mortgage Broker Group’s services are provided free to you, and we have a regulatory requirement to always act in the best interests of you, our client.
There’s no obligation, no cost ever, and nothing to lose.