When’s the Best Time for Buying Residential Property?
Whether you’re a first home buyer, investor and or looking to upsize or downsize, unfortunately, the answer is not as straight forward as you’d like. Speaking from personal experience, the best time to buy occurs when good planning meets good fortune – that is, being prepared and being in the right place at the right time.
To put it another way with reference to the famous aphorism often associated with the great golfer Gary Player, “the more I practice, the luckier I get”. When buying property this translates into the more you plan, prepare and research, the more likely you are to buy when the time is right.
To help with the planning and preparation side of things, I believe there are three important factors, each having three important questions you need to ponder…
1. Personal factors
a) Are you ready to take on the long term commitment and discipline associated with a home loan?
You need to be sure you can handle and stick to a budget and can make the necessary spending sacrifices in order to meet your monthly mortgage payments. This is as much about personal discipline as it is about sound financial management.
b) Are you ready to stay in one place for an extended period of time?
You have to make sure the location of the property is one where you can see a long term future and is somewhere you want to put down roots and be part of the local community.
c) Does the property meet your personal and lifestyle needs?
This is about finding somewhere that meets your practical needs (for instance property type, location, design, and layout) as well as your personal aspirational (such as a home that reflects a sense of achievement or a place where you can see yourself starting a family)
2. Financial factors
a) Have you prepared a budget?
You must work out how much you can reasonably afford based on your after tax family income. To do this you need to determine your borrowing power and your purchasing power which together will inform you about which properties are in or outside your price range. A detailed budget will help you do this.
b) Can you afford to borrow?
You have to make sure you can meet your mortgage repayments on time every time. This is where buying in a low interest rate environment can be helpful but you must be careful not to over-borrow just because finance is cheap. Remember rates can go up and you could be in for a nasty shock when they rise.
c) Have you saved a decent deposit?
A good sized deposit (which I define as at least 10% of the purchase price) will help reduce your borrowing requirements, provide for a buffer if things go wrong, and demonstrate to you and your lender that you have the discipline to make and stick to regular financial commitments – in this case, a savings plan.
3. Market factors
a) Have you taken into account seasonal factors?
During spring and summer there trends to be more stock on the market and therefore better choice. However, there is also more competition for quality properties. On the other hand, autumn and winter tend to be quieter periods with fewer sellers but also fewer buyers. So you need to determine when the best time for you to enter the market is and this could for instance, be when it’s a bit quieter.
b) Have you taken into account cyclical factors?
Property prices move in cycles – upturn/boom and then downturn/stagnation (or deflation if the market goes pear shaped). The trick is to buy near the bottom of the market and before prices peak, but of course this is hard to predict. So keep an eye on the general level and direction of property prices. You can do this by speaking to a number your Local Agent and accessing free online property reports provided by the major websites like Onthehouse.com.au
c) Have you considered the level and direction of median property prices?
This is about looking at the performance of specific suburbs and streets you’re interested in buying into, which may or may not follow the state or national trend (Use the free Suburb Research from Onthehouse.com.au). Again, do you research, follow sales results and speak with a number of selling agents for advice and guidance.
You may find you don’t have all the answers to these questions, and that’s OK for now. The important thing is to know what to ask and where to go to get help if it’s needed. So seek out trusted family and friends to get their advice and guidance, and use property research sites like Onthehouse.com.au to research properties, suburbs and Local Agents. Between them you should be able to find the answers you need to make an informed and timely purchase decision.
Peter Boehm is the Finance Editor for Onthehouse.com.au.
Published: 8 March, 2016.