Ep 17. Should I Wait To Buy In Case Prices Drop?
It’s the burning question on every buyer's lips - Should I wait to buy in case prices drop? Michelle explains the impacts of waiting for a bargain, and why buying now could be a better idea.
Here’s what you’ll learn from today’s episode:
Is waiting for the market to drop a good idea?
How waiting can end up costing you more money.
Interest rate rises vs. lower property prices.
Bargains, do they really exist?
What are micro-markets, and what do I need to be aware of?
Speakers in today’s episode:
Michelle May - Michelle May Buyers Agents
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Please note that any views or opinions presented in this podcast are solely those of the speakers, and do not necessarily represent those of any business. These views and opinions are general in nature, and do not take account of your personal objectives, financial situation and needs. Please consider whether it applies in your circumstances and seek professional advice wherever appropriate.
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VIEW TRANSCRIPT
Hi, and welcome to the Buy Your Side podcast, the property podcast to help you buy better. My name is Michelle May and I am the principal of Michelle May Buyers Agents.
Today I want to answer the burning question on everyone's lips at the moment. Should I wait? Because everyone's saying that the property prices are going to come down. Now, it's funny because this question gets asked of me, not just now, but ever since I've been a buyer's agent. And I tell you what, I have a very simple answer for you. If you're ready to buy, you buy now, and I'll tell you why.
Currently, the talk is all about the rise and fall of the market. And of course, interest rate rises and most economists and most banks have been saying when interest rates go up, inflation goes up, prices are likely going to drop.
So here in Sydney, here in Australia, they're still predicting an increase in prices, 5 to 10%, depending on which paper you read and what day it is. And then they're going to come down in 2023/2024. However, there are a couple of things I really need you to consider.
First of all, it doesn't really matter what your friend, partner, hairdresser, butcher around the corner or second cousin is telling you, their opinion of the property market. Simply smile and wave and don't listen, because first of all, if you're looking at the property market as a whole in Australia, yes, there are rises, there are dips, there are troughs, there are peaks, but if you looking at the property market as a whole over time, prices will continue to rise and typically prices when they come down, they do not come down below previously recorded levels. So when we're looking at, for example, this last 18 months, two years since COVID has been around, property prices have gone up on average in the vicinity of around 25%, depending on where you are in Australia. But the correction that the banks and economists are predicting currently is somewhere in the range of 5 to 10%.
That means that whoever bought at the beginning, or even in the middle of COVID, or even now, they're still within the projected property increases - they're still winning. And they've bought a property and they can get on with their lives. So I think all of those who have waited for COVID to wipe out the property market in Australia, are probably still waiting now because they've been priced out of the market completely.
One thing that people don't consider is that whilst you're waiting for those prices to drop, and to score yourself a bargain, you're also missing out on another year or more, that the property that you did buy today would have increased in value, but you decided to wait instead. You have also been paying to live somewhere else. The rent on a house that you don't own, that could have been a year's worth of mortgage that you would have been paying off on a property that is your own.
When we are talking about higher interest rates and lower property prices, the correlation is very clear. However, You also need to be looking at a very considerable change in your repayments when those interest rate rises do happen. So whilst you may be scoring yourself a cheaper property, you will also be locking yourself into a long-term higher fixed rate. So the economics of this may not work out for you. So whilst you may be paying a lower purchase price, your repayments are higher and it's all interest. So think about this as well. Shouldn't the focus be on finding you that perfect home now, as opposed to waiting for when the market drops, because that perfect property may not actually be around at that point in time.
This brings me to bargains. Everybody is always looking for a bargain. Now 9 times out of 10, when I see a property that is tagged as a bargain, it's too good to be true. You know, if it looks like a bargain compared to the rest of the market, there is a reason for this guys, it's not just a miracle that you've uncovered this bargain property. There will be issues with the property, with the services in the area, with the planned construction or zoning changes. Things that will not be evident when you go through the property even, but you need to be aware that that will be something that will be a reason why this property is a bargain. So no matter what the market is doing, you don't want to buy those. No, you don't want to buy on the really busy roads because those are the kinds of property that in a hot market will drop the first in price and will be the hardest to sell in a down market, and those are the kinds of properties that will then show up as a bargain because those people are dying to get off that main road. So don't believe the hype of buying a bargain. Okay. It's best to go for quality, no matter what the market is doing.
Finally, I want you to be aware that wherever you're located in the world in Australia here, a lot of the economists and the banks are talking about the property market as being one. Now, I want you to be aware that there are many different micro-markets, broken down into state, broken down into different cities, even broken down into suburbs, and they don't all operate the same way. Also, different price brackets will operate in different ways. The housing market will operate differently to the apartment market. So whatever the media is, reporting is all very generalised, and so you need to be aware that you may be in a segment of the market that is not actually dropping in value. It may be the case, but it may not be the case. So, understand what it is you're trying to buy and what that particular segment of the market is doing at that point in time, particularly also because the media is always catching up with what's actually happening on the ground. So there's always a lag. Unless you know exactly what that micro-market is doing for the property that you're looking at, I wouldn't listen to anyone else.
If this answer of mine has given you more questions, more follow-up questions I would love to hear from you. Drop me a line at hello@buyyourside.com.au. Send me your burning questions, I’d love to answer them.
For now, thank you for listening - and until next time.