Why there’s nothing to fear about the current housing downturn

By Gerv Tacadena

Housing downturn presents an opportunity for young homebuyers.

The current dry spell experienced across Australia, particularly in Sydney and Melbourne, is sending shivers down the spine of potential home buyers. Forecasts of deeper cuts are not helping, discouraging buyers from even considering purchasing in this current market climate.

However, what these buyers fail to realize is that the softening home prices actually present a silver lining.

In a think piece on The Sydney Morning Herald, The Money Barre CEO and cofounder Melissa Browne said a short-term drop in prices should not dishearten buyers from purchasing properties.

"Certainly, with potentially rising interest rates and falling clearance rates, it’s a buyer’s market for the first time in a long time which should be good news for any potential purchasers," Browne said.

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For Browne, one of the alternatives young buyers in the market can consider is rentvesting, which allows them to invest in a property while still renting a home to live in. Browne said this route will help buyers take advantage of negative gearing tax concessions. Further, buyers may potentially pay less in rent than they would to a mortgage.

Citing property analyst Pete Wargent, Browne said that while homeownership is a successful investment due to the leverage involved, many young buyers are afraid to due to a possible slump in prices.

Browne said the weakness in prices creates a window of opportunity for buyers to consider property ownership or rentvesting instead.

"What is clear to me, is that home ownership and using it as our only means of wealth creation is potentially being lost to us. Particularly when you consider the huge gains in our major cities. However, property ownership, especially when you factor in our willingness to hold onto it long term and the power of leverage, in my opinion, is still an option worth considering,” she explained.

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