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Australia Housing: Buy, Sell, Wait? Key things you should consider.
In all honesty, mortgages are a pretty boring product.
It really all boils down to four key questions for a prospective borrower:
- How much can I borrow?
- What deposit do I need and how long will it take to save?
- What is my rate?
- What are my repayments?
Similarly, residential property is a relatively unexciting asset class. Although residential property is by far Australia’s most valuable asset class, being more valuable than either shares or superannuation by about three times, it is a relatively illiquid asset that changes value at relatively modest rates.
Yet Australians are transfixed by property. That is because nearly 50% of Australian’s wealth is tied up in the residential property asset class, with access to credit a key to building and unlocking that wealth creation journey. There is also no doubt that the home ownership dream remains part of the Australian ethos, although that dream may have evolved in recent years with the challenges of a less affordable housing market and the evolving attitudes of Gen Y and Millennials.
So much information. So much noise.
We are now living though a time when the external factors affecting the mortgage market and the housing market have never been more dynamic and impactful, all of which can make things confusing and challenging for those looking to enter the market, refinance, upgrade or even exit the market. These factors include:
- Changes to the availability of credit, particularly as a consequence of the Royal Commission and how the banks look at certain geographic areas and new developments
- The impact of new supply coming to the market, particularly new apartment developments on the eastern seaboard
- The changing nature of the demand for credit, with investors and foreign buyers being far less active in the market over the past 12 to 24 months than in recent years, with first home buyers becoming relatively more active in the market in recent times
- Recent State elections in many states, as well as the impending Federal election
- Changes in state and federal laws and policies affecting housing and credit (stamp duty, first home buyers grant, mortgage broker remuneration and the big one – taxation policy (negative gearing and capital gains tax) at a Federal level)
Thinking back to when my parents bought their first house in 1968, they wouldn’t have had a clue about any of these things, even if they were relevant considerations way back then. For them it was all about timing and the necessities of life – they had got married the previous year and they wanted to start a family and had to live somewhere!
Yet today, driven by a 24/7 news cycle, the general public is fed a never-ending stream of information about house prices, banks and even mortgage brokers that can make things very confusing and complex, even for those of us in the industry. In seeking to manage their way through this complexity, consumers have been aided by improved access to high quality independent information about house prices and the growth of the mortgage broking industry to help them navigate through the maze, with 59% of all mortgages originated via a mortgage broker.
What if you filter out this noise?
So is it a good time to buy? A good time to invest? A good time to sell? Should we wait until the Federal Election is over in May? Should we get in ahead of Labor’s planned changes to negative gearing and capital gains tax? What will happen to property prices after these changes come in, assuming Labor is elected?
No-one can answer these questions with a high degree of accuracy and confidence with equal application for everyone. If they try to, they are kidding themselves. Even if someone attempts to answer these questions having regard to your personal circumstances, their advice is still likely to be based on many assumptions and unknowns.
From a first homebuyer perspective, my former colleague Tim Lawless at CoreLogic made the following recent observation, in noting improving housing affordability could be the silver-lining to this downturn. He said, “As dwelling prices trend lower or level out, household incomes are edging higher and mortgage rates remain around the lowest level since the 1960’s. First home buyers are clearly taking advantage of the improved levels of affordability and less competition in the market.”
At the end of the day, if you have your finances sorted, have solved the Deposit Obstacle and your personal circumstances are such that your life would benefit from owning property rather than paying off the mortgage for someone else’s property, then it is hard to argue that there are certainly some good opportunities for first home buyers in the market at present, despite the many unknowns and uncertainties impacting the market.
Stop worrying about the market and focus on your goal.
It all comes down to this; If you find the right house that you can see yourself and your family in for 5 to 10 years, then don't worry what will happen with house values in 6 months. This doesn't matter when you're just living! focus on life, pay your mortgage and enjoy your home. I am sure my parents don’t regret the decision they made way back in 1968!
If you've found your 5 to 10 year home, but don't have enough savings for a bank loan. Get in touch and check your eligiblity by clicking below.
Granite were with us every step of the way and enabled us to purchase our first (dream) home. We used their 100% loan (no deposit, no LMI) product. Very happy and would recommend them to legal professionals like us who want to buy their first home.Mitchell K