The transition of the property market to more usual behaviour presents an opportunity for many buyers frustrated by consistently losing auction bidding wars.
Markets across Australia are showing the first signs of cooling in response to the Reserve Bank of Australia (RBA) hiking its target cash rate.
For buyers, the good news is that prices are dipping in most centres, according to researcher CoreLogic.
It says there have been 19% fewer settlements in the three months to May compared with the corresponding period in 2020. And the Australian Bureau of Statistics numbers on new mortgage commitments align with this performance.
CoreLogic suggests the RBA’s first two increases in its target cash rate have hiked the cost of a 30-year, $500,000 mortgage by $200. Higher rates, which sit around 4.5% to 5.5% right now, will put finance beyond the reach of some.
So for buyers, this is a case of swings and roundabouts – what you might gain from lower prices is likely to be taken by higher mortgage repayments.
However, our first observation is that you shouldn’t give up your search for a property. Sitting on the sidelines is unlikely to fulfil your ambitions.
If you own a home and are looking to upsize or downsize, the financial dynamics will probably even out. You’ll sell for slightly less but buy more cheaply.
There are a number of other market considerations to think about:
When prices dive
While rate rises have a sobering effect on an exuberant market, a healthy economy and tight labour market bolster prices. According to CoreLogic, our economic resilience, combined with the lowest unemployment rate since 1974 at 3.95%, will create an “orderly” transition to the market behaving normally.
Second-guess danger
Trying to pick the right time to buy and sell is fraught with danger and frustration. You can wring your hands about whether you could get a higher price or buy more cheaply, but in the long-term it evens out. We believe you should move properties when you’re ready.
Many markets
A lot of property market commentary is broad-brush by necessity. However, Australia isn’t one giant market but thousands of micro ones. Talk to one of our agents to find out what’s happening in the local real estate market.
Seek advice
If you’ve already obtained a pre-approved loan, you may wish to go back to your lender or financial adviser to check the impact of higher mortgage repayments. You might also want to explore fixing your rate for the total loan or a percentage of it. Explore all your option and seek financial advice.
NOTE: The information in this article is general in nature and provided as a general overview only. Always consult your financial advisor or accountant for advice specific to your personal circumstances.