To say the signals from the housing market are confusing would be an understatement, and this is leaving many first-time buyers unsure of what to do. Should you wait a little while longer in hopes of a better deal? Or should you make a move in the market right now?

What to Bear in Mind as You Make Your Decision

Let’s try to make some sense out of these signals, as we look at some factors to consider when deciding whether to make your move on a home purchase.

After Rampant Growth, Property Prices Are Cooling

For almost two years, property prices in Australia soared. After a slight fall in the total value of dwelling stock in the second quarter of 2020, the market exploded. This total value sat at almost $10.2 billion at the end of Q1 2022, an increase of almost $3 billion from the same period of 2020.

Average prices have rocketed too. In New South Wales and Tasmania, mean prices rose by 29.2% and 30% respectively between Q1 2021 and Q1 2022, and these two regions led the pack as Australian property prices spiralled out of control. Of all the nation’s states and territories, only two — Western Australia (4.9%) and Northern Territory (2.4%) — posted increases below 12% over these 12 months.

But things are changing. In June 2022, Domain released its report for the second quarter, which highlighted far cooler market conditions than those we’ve seen over the past two years. While only Sydney and Melbourne posted median value decreases in the second quarter — falling by 2.7% and 0.9% respectively. This was enough to bring median capital city prices down by 0.9% overall. This movement has reignited the debate around the property market and led many first-time home buyers to wonder if now really is the time to act after all.

Home Loan Interest Rates are on the Rise

This cooling of the property market was not unexpected, however. Earlier this year, the Reserve Bank of Australia (RBA) announced that it would increase the target cash rate to 0.85%. This effectively lets lenders apply a higher level of interest rates to property loans, after an extended period of record interest rate lows in Australia. While increasing the cash rate does not automatically raise the interest rates experienced by home buyers, it does give financial institutions the opportunity to increase interest — something many banks are only too happy to do. ANZ, Westpac, the Commonwealth Bank and NAB have all announced that they will increase interest rates in line with the RBA’s cash rate hike.

What’s the point of this interest rate hike? Well, the measures have been introduced as a way to curb the rampant inflation that is currently plaguing the Australian economy. From a home buyer’s perspective, this also means bringing the unsustainable growth of property prices under control.

To Buy or Not to Buy: Is Now a Good Time?

So what does all this mean, and what should first-time home buyers do next? This depends on movements in the market. For instance, buyers might want to wait a few months to see if house prices will fall further, but this might not be a good idea.

Vacancy Rates Are Likely to Prevent Major Price Decreases

The property vacancy rate is around 1% across the country — an all-time low for most states and territories. This means there are simply not enough available properties to support extensive price decreases. The market may not fall much lower than current levels.

The Battle Against Inflation Is Not Won

Interest rates have already increased, so many first-time home buyers may feel that their ship has sailed in terms of securing a low interest rate. However, today’s rates could still be comparatively low compared with what is to come. It may take further interest rate hikes to bring inflation under control, which means first-time home buyers may want to lock in a lower interest rate on a home loan sooner rather than later.

Get Help with Your First-Time Property Purchase

Is now a good time to buy? There is no definitive answer to this question, as it depends on personal circumstances. However, the broader indicators from the market suggest that now could be a good time to purchase. Values are unlikely to fall much further, and interest rates could make property transactions far more expensive in the near future.

To find the ideal home loan for your property purchase, reach out to Sydney Brokers. We help buyers just like you to connect with the mortgage and loan products they need to secure their perfect first home.

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