The property market is confusing at the best of times, let alone after the shit-on-a-plate year we’ve had in 2020. To help you get clear on where the property market is at, I’ve compiled a list of 8 top things to be aware of right now, and picked the brain of a buyer’s advocate in Melbourne to get the lowdown from a professional perspective.
Note: local insights relate to the Victorian market, but more general assessment is applicable to Australia and property markets as a whole.
1. We’re in a seller’s market
Particularly in Sydney and Melbourne, a lot of first home buyers have been waiting for the market to drop, and many thought that Covid-19 might finally be the kicker. Sadly not. Melbourne Buyer’s Advocate Emily Wallace says “It’s a simple equation of supply and demand meaning there are more buyers than sellers.” So many buyers who were essentially ready to buy pre-Covid have essentially been bottlenecking at the point of purchase while things locked down. Many of these first home buyers are young people living at home, meaning in many cases their deposits have only grown during isolation. Others have been able to escalate their savings during lockdown and are now ready to buy too. Higher demand means fiercer auctions and properties selling very quickly, so watch out.
Emily suggests for those buying at auction, “have a hard and fast limit agreed upon and written down, especially when you are purchasing as a couple. “It is extremely important to make sure you aren’t making a decision during the auction!”
2. The best time to buy property was yesterday
“Sellers are not going to want to sell their home for a bargain, they want market price,” says Emily, and she makes a great point. Even when markets do drop, vendors then avoid putting their property on the market unless they really need to sell, because nobody wants a low price for their property.
“We are in a rising market which means you would rather buy in the rise than at the peak. I would encourage those who have been thinking about making a move to start looking and educating themselves on the market,” Emily added. “Prices did drop in the April/May lockdown but looking at weekly data, the median house price is on the rise week by week and the market is considered to be hot. I would strongly suggest buyers don’t waste their time with ‘low ball’ offers as this strategy will not work in the current market climate.”
3. Demand is high
Really high, and for many reasons. Some are ready to buy their first home, some are downsizing, upsizing to accommodate lockdown babies, or moving further from the city since working from home. Demand remains high for all kinds of properties in more areas than ever.
High demand markets are when professional support can really help you save big on your property purchase. Emily is offering readers a free no-obligation consultation to discuss your property purchase and whether working with an advocate could suit you. No matter where you are in Australia, she can connect you to an advocate in your state if you choose to explore the option. Click here to book yours.
4. Location is still key – but criteria may be changing
Speaking of working from home, the criteria for a ‘great location’ could be changing. Properties in close proximity to things that matter will always be popular, for example schools, parks and amenities. Proximity to the city has become slightly less important, which has “taken the heat out of the inner ring”, though demand remains high among first home buyers who have a better shot at the market than ever.
5. Your pre-approval could’ve expired
In terms of your home loan, be sure to check in with your bank or broker to ensure your pre-approval hasn’t expired (and is up to date!). Many only last 3 months, so make sure it’s still valid before you jump into the market.
6. … or you may need to be reassessed
Likewise, if your situation has changed in any way, you may need to be reassessed. Changing jobs (even if it pays more), changing salaries, changing industries, changing spending habits, and even changes to your savings can all impact your ability to access credit.
Make sure you’re honest about your situation and update your bank or broker as soon as anything changes.
7. Credit is going to be easier to access than ever
Responsible lending laws in Australia are changing. You might remember the Hayne Royal Commission which led to stricter criteria for home buyers to obtain mortgages after the GFC. The Australian Government is now loosening these restrictions (slightly, not entirely) to make it easier for more people to access credit. This means more people can access loans, which adds more demand to the market.
8. Borrowing is cheaper than ever
Low rates also mean more demand, as more people can borrow, and borrow in higher amounts. All of this translates to more competition out in the market and properties selling beyond their quoted range.
Interest rates are at rock bottom right now, but they won’t stay that way forever. When assessing how much you could afford in repayments, calculate what your repayments would be at much higher rates (i.e. 6-8%). Your lender sort of does this, by using a serviceability rate to assess your application. But with lending laws relaxing, it pays to do your own due diligence as well. While rates will take a long time to recover, calculating what repayments would be at higher rates helps reduce your risk of over-borrowing.
This article was sponsored by Emily Wallace, Buyer’s Advocate. Book your free no-obligation property consultation here.