Property analysts indicate it’s a 'buyers' market' at the moment, but there are signs prices could drop in the coming months. Should you wait?
House prices are falling and the number of properties on the market is increasing.
Recent RP Data figures indicate house prices fell a seasonally adjusted 2.1% in the March quarter, following a 1.4% decline in January. According to national research director Tim Lawless housing stock on the market is slow to move, with volumes in February 18% below the five-year average.
"General market conditions remain weak with a lot of stock for prospective buyers to choose from. We now have higher than average levels of vendor discounting and properties are taking a longer time to sell," he said.
Lawless said high levels of consumer caution were one reason behind dwindling volumes.
"The higher cost of living and debt consolidation remain at the forefront of consumer’s decision making which is reflected in the high household savings ratio and low transaction volumes for housing," he commented.
While some prospective buyers are holding off to save for a deposit or to build equity in their present property, others are waiting to see what the market will do in the next 12 months.
“The market is falling and is likely to fall at least 5% this year as an average for the capital cities,” SQM managing director Louis Christopher said. “We are most bearish on the Gold Coast and Sunshine Coast markets. Brisbane, Darwin and Perth also appear to be in significant downturn.”
Though the property firm is forecasting a decline, it stopped short of predicting exactly whenthe market will make a recovery.
“At this stage it is difficult to determine when the market will bottom. Most likely it will occur shortly after any announced interest rate cut or significant federal government stimulus in the market place, similar to the First Home Buyer’s grant boost release in late 2008. There is an outside possibility that the market could bottom without an interest rate cut or government stimulus if there is a large acceleration in inflation. At this point in time, consensus estimates suggest only a modest to moderate rise in inflation,” he commented.
If you’re considering buying property at the moment, there are some good reasons to make your move now rather than wait for further decreases in price. These include:
1.) Competition – at the moment there are fewer buyers than properties on the market. If you wait for prices to fall further, you risk facing increased competition from borrowers attracted by low prices.
2.) Rising rents – In the grand scheme of things, a drop in house prices of $10K-$20K means little to your monthly mortgage payment. For example, a 25-year mortgage on a $250K property at 7.5% would cost about $425 in weekly repayments, while the repayments on a $270K mortgage would be $460/week. While it adds up over time, home buyers must weigh that against potential rent rises and the time lost in terms of building equity in their new home.
You might also want to wait until the market has completely bottomed out altogether and is showing signs of recovery before making your move. Possible reasons include:
1.) Price of your property – if prices in your neighbourhood are already dropping, you might want to wait it out to ensure you see a good return for your investment.
2.) Less than 2 years – if you’ve lived in your current property for less than two years, you probably have not had enough time to build up equity in your home to make it worth paying the fees associated with buying a new home (which would negate any savings achieved by purchasing at the bottom of the market).
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