Buy now or wait and see?

Buy now or wait and see?

Another month, another rate hike. If you’re looking to buy residential property – particularly if you’re a first homebuyer – it’s hard to know what to do in this economy with the ongoing interest rate rises.

Is it possible that you can still find good opportunities and buy now?

Or is it best to wait and see?

According to Credabl’s Lindsay Rose, there are important considerations for both options, and it will always depend on your personal circumstances.

“Generally, when interest rates are rising, people’s affordability goes down because they’ll be paying more interest overall. And that means people could be paying less for houses as prices inevitably go down in the market,” Lindsay shares.

“A lot of people are sitting back and waiting right now. But, say, in six months when all those people decide that it’s time to buy, there’s going to be a lot more competition.”

Here are key considerations for both sides of the coin.

Buy now

Fear and hesitation in the market creates opportunities for people who want to buy. So should you take advantage of this and make the jump?

“People are afraid to get into the market because they don’t know what the rising interest rates mean for them when they have a loan. And then what’s also happening is that people selling property are afraid they’re going to lose equity, so they want to offload it as quickly as possible,” Lindsay says.

“If you have that affordability and are in a position to anticipate the future interest rate increases – generally many medical professionals do – you could also end up saving a significant sum. For example, you might see a property advertised for $950,000 to $1 million and it sells for $920,000.”

Considerations

• Make sure you’ve recently reviewed your budgeting and income

• Factor in the future interest rate rather than today’s rate

• Ensure you’re comfortable with the actual monthly repayment figure plus a buffer – don’t just look at the price of the property

• If you rely on property reports, remember there is a data lag

• Given it’s a buyer’s market across many key states in Australia, can you negotiate on price? It’s crucial you’ve done your research for the area

• If you are considering using a buyer’s agent, remember there are fees attached to this service so determine what value you want to get

Wait and see

The other side of the coin are those who are, understandably, erring on the side of caution.

If you can’t afford it or don’t feel comfortable buying a house, you shouldn’t risk putting yourself into financial stress. That being said, it’s good to know how to put yourself in the best position and be ready for those opportunities while you wait.

Considerations

• Determine how long you can afford to pause

• Will you continue to keep an eye on the market or pull out completely? The latter may mean you miss out on some great opportunities, so you need to be comfortable with that

• Holding out for a better deal? There may not be one. Previous downturns have been short in certain cities so waiting for a bargain or deep discount could mean missing out on a lot of properties

• Don’t hyper focus what the market is doing but consider the property itself and if it ticks all your boxes

• Even while you wait, having a pre-approved loan in place means you can jump on any opportunities quickly, ahead of those who have been waiting but still need to get approval. If you don’t end up using the loan and it expires, you can apply for re-approval, which is a much easier process

There are factors to assess for both sides, but if you’re still unsure, speaking to a finance consultant like Lindsay means you can run through your numbers and budget – and importantly, get a specialist’s viewpoint for your unique circumstances.

Lindsay is Residential Lending Specialist at Credabl.  She operates with a high level of professionalism and thoroughness, going above and beyond to ensure you receive a personalised service. If you have any questions about residential property or buying a home, get in touch with Lindsay here.