Despite the shaky, crazy things going on in finance markets around the world, now is the time to buy real estate. There are a lot of properties on the market right now, at least in Brisbane where things have gone ballistic in the past few weeks. So if you’re shopping for a home, you’ll have a lot to choose from, and you’ll also have a lot of people seriously looking at buying your current home, if you have one. All of that makes for a good sale time, so it might be worth making the jump.
However, there are a few conditions that you’ll need to meet before deciding to buy a new home:
1. Make sure you have a large deposit
If you’re buying real estate in the current market then you’ll need a large deposit, and make sure you can handle the repayments. If you’re already a homeowner then you should have built up some equity behind you. You could even downsize to shrink your current mortgage repayments if you have to. If your deposit is too small, your repayments could be high, and if you’re committing to anything over 25 per cent of the monthly budget to your mortgage repayments then you’re probably stretching yourself too far. Australia might be heading into a recession, and unemployment is expected to climb so don’t push your budget beyond what it can handle.
If you’re a first home buyer, then it might be worth waiting just a little to see if property prices are going to remain steady or drop further. If the only deposit you can put down is that $14,000 that Uncle Kevin gave you as an early Christmas present then you might want to reconsider. In fact, if prices are dropping then the big banks will be reluctant to provide you with the money you need.
2. Know the market.
This rule always applies regardless of market conditions, but at the moment you really, really need to know what property prices are doing in your area. If you’re prepared to take action as a buyer, you’ve got a lot of negotiating power, with a lot of properties to choose from and sellers desperate to make a sale. Some properties are spending 60 to 80 days on the market. If they’ve been priced too high, the seller may be willing to look at a lower price. However, you do need to know what’s going on so that you can pick up a bargain, not an overpriced lemon.
3. Sell well.
The problem with choosing to buy now is that you’ll generally need to sell your current property, and that can be a slow process (although I’m still hearing of properties selling in a matter of days of going on the market). With that in mind, choose an experienced real estate agent, and market your property well with professional photography, a floor plan and even a feature listing on the major real estate portals. If you want to sell, you have to give yourself the best opportunity to stand out from the crowd, so now is the time to spend a little more on top quality marketing services, not less. I’ve spoken with some of my real estate agent clients and they are reporting some quick sales when they’ve presented a professional marketing campaign.
4. Be in it for the long term.
With property prices shaky, now is not the time to speculate on property. A couple of years ago the old “slap ‘n’ dash” renovation was a genuine money earner, but now it’s looking vulnerable. However, if you’re looking to hold on to your home for several years, and not just 12 months, then any further slump in property values will probably be offset by a price rise somewhere down the line. And remember: a drop in property values is only actualised if you sell up.
So there you have have it. In my view, if you can’t meet all of the above conditions, then don’t buy, as you only risk getting yourself into a whole lot of trouble
Now some people might say that now is not the time to buy, and the arguments are certainly worth thinking about:
“But property prices have dropped, and they’re going to drop further!”
The value of your property may have dropped a little in recent months, but so has everyone’s property. The old cliche that “You’re buying and selling on the same market” is worth remembering. It’s called the property cycle, and basically you just need to get your head around the idea that property prices don’t always climb upward at 10 per cent a year. Prices go down, and prices go up, and that’s ok, so long as you can continue to make your mortgage repayments.
If prices drop further, then yes, you might be able to pick up a bargain in 2010. If you’re prepared to take that risk, then it might be worth waiting for a while, though you’ve got to remember that your current property would have also dropped in value.
“The economy is too unstable”
Yes, the economy is wobbly, but if you follow the conditions outlined above then you should be alright. Don’t overstretch yourself financially, and be well informed as to what’s going on in your area. If unemployment rises dramatically, then we may see a further drop in prices, likewise if a lot of retirees are forced to sell their home in order to downsize. But we won’t really know if that will happen until it kicks in.
This debate – to buy or not to buy – is also going on over at the domain.com.au blog. Some of the comments offer a pretty good reason to buy and not to buy, so there’s certainly a wide gamut of opinion out there. Has the Aussie property market hit rock bottom yet, or has it got further to fall? Again, some say yes, whilst others say no.
What do you think? Is now a good time for anyone to buy? Should first home buyers jump now, or wait?