Four tips for Australians looking
to buy property in the current market
by: Katie Eastment
Tighnening lending standards, reduced foreign demand and decreasing rental prices are all thought to be contributing to a decline in property prices throughout most of Australia.
Each market around Australia is different, so do your research but there are three key market factors you need to consider if you’re thinking about buying a property:
- Regulatory changes: With foreign investment in residential property continuing to decline in recent months competition is reduced, creating opportunity for those looking to buy
- Credit conditions will continue to tighten: Stricter lending requirements could push Australian house prices down further by decreasing purchasing demand, as there are less buyers in the market
- Stock on market: In locations like Sydney and Melbourne property prices have been dropping, and vacancy rates increasing.If you’re looking to buy an investment property in either of these cities be mindful that there is now a housing oversupply which eases rental prices for tenants
Although these market factors can create both challenges and opportunity for buyers, your property goals are still in reach, if you plan, save and do your research.
Resimac is committed to empowering Australians to reach their property goals and we have prepared some tips for choosing the right property in a market which will inevitably see more change.
Tips for home buyers when choosing a property
Look for the long term
Despite what you may see on TV, don’t bank on making a quick buck by flipping a property. In uncertain timesit can be good idea to look to areas which have performed well over time, as they are historically a steadier investment choice.
As well as looking for the right suburb, there are a number of other factors to keep in mind. It’s important to step back and look for practical local services which will drive value in the long term. Look at transport links, both road and public transport access, childcare and schooling options as well as social demographics for the area.
If you’re planning to rent your property out to residential tenants, it’s essential to take a look at the local rental market. Start with the following questions:
- What are similar properties bringing in in terms of rental yields?
- Has the local rental market fluctuated in previous months or years?
Also, look at what development and construction is taking place in the area, an influx of new properties could lead to an oversupply of rental properties, bringing down rental prices.
Use your head, not heart
When purchasing a new home, emotion often comes into play. With falling house prices, it can be easy to get carried away looking at homes that were previously out of your budget. Like any type of sale, even if prices have dropped significantly in an area, shop with your head, not your heart – if the price isn’t realistic for your situation, look for another option.
Be mindful of emotion coming into play when choosing a new home
Ensure that you’ve thought critically about specific expenses that could arise from your choice. For example:
- Does the house need work or is it ready to live in?
- Will I send my children to the local public school or choose a private school option?
Also consider bucket list items you might need to sacrifice with the purchase. Choosing a particular property over another might delay your dream holiday or new car plans.
Weigh up renovators delight versus new
Australians have always loved a home improvement project and with DIY inspired renovation television shows like The Block and House Rules, buying a run-down property on the cheap to renovate can be a great choice.
From skills to time and money, consider all aspects of renovating
There is, however, a lot to consider when choosing the renovation option. Ask yourself these three crucial questions:
- Will the renovations add value to the property (above the cost of the works)?
- Do I have the skills, time and/or capital to manage and finish the renovations?
- Can the renovations wait, or do they need to be done immediately?
The general rule of thumb for planning a renovation is to spend between five and ten per cent of the purchase price. This does, however, change depending on the balance of structural changes versus cosmetic makeovers.
Factor in maintenance and insurance costs
Apartments, freestanding homes and everything in between all have their own pros and cons in terms of fees, insurance and maintenance. These should all be considered when deciding which type of property you buy.
While some new apartment blocks come with all the bells and whistles, from pools to gyms and saunas, you will need to pay strata fees to maintain the building and its perks. Make sure you factor these costs into your budget.
Freestanding homes, on the other hand, might not have strata fees, but you will be responsible for maintenance and repairs
There are also different types of insurance you’ll need to take out, depending on the property. For example, you can take out contents insurance to protect assets such as stoves, carpets and hot water systems and home insurance in the event of a fire and other events.
For investment properties, landlord insurance can cover you for loss of rental income if your tenant doesn’t pay.
The opinions expressed in this article are the opinions of the author(s) and not necessarily those of Resimac. The above is general commentary only and is not advice tailored to any individual’s financial situation. We recommend seeking advice from a mortgage or finance professional before implementing changes relating to your finances.