There has been so much happening lately with house prices all over Australia. We all know Sydney and Melbourne house prices have grown enormously over recent years, and Hobart and Canberra are now hot on their heels.
But you are looking to buy your first home, or perhaps you are upgrading now you are starting a family. Whatever the reason for buying, you are not sure whether to buy now or to save as much money as possible, so you have a larger deposit to buy in the future. If you ask friends and family, you will likely find everyone will have a different opinion, which leaves you none the wiser!
So, what should you do? Unfortunately, the answer is not simple, however there are some things you should consider, to make a more educated decision.
- What is your capacity to save money? Be realistic! The more you can save each month, the faster you can grow a deposit. However, even saving a large amount of money each month will not put you in a stronger position if house prices go up – if a $600,000 house goes up 1%, that’s $6,000 more you are paying.
- How much do you have now for a deposit? You generally need a 20% deposit to avoid paying mortgage insurance (that’s insurance for the banks benefit, not yours), however you will also need enough money to cover any transaction costs such as stamp duty. There are online calculators that can calculate these costs for each state.
- What is happening at auctions in the location you want to buy? You should be going to as many auctions as possible. Yes, it’s a pain, but it’s the only way to accurately understand the property market, and far better than reading media reports about the market. This will allow you not only to understand what sale prices are being reached, but also how many bidders are seriously trying to purchase the house, and how aggressive the bidders are being. Ultimately house prices are determined by how motivated the buyers are, versus how motivated the sellers are! You need to know this information intimately.
- Where do you think house prices are headed? Having attended dozens of auctions, you should now have a much better idea about the housing market, and whether the buyers or sellers have the upper hand.
- Today’s crazy high price, could be tomorrow’s bargain! Remember that house prices are relative. We’ve all thought at some point in time that someone – a friend, family member, or the sunglass wearing hipster at the back of the auction, has clearly overpaid for a property! Only to see house prices rise dramatically, making that same purchase seem like a bargain just months later! Of course, the exact opposite can also happen, so know your market!