Buying property in 2018?
According to the experts, Australia’s property market is taking a turn. What does this mean for you as a buyer?
When it comes to buying property in 2018, there’s a lot of talk about change – interest rate hikes, slowing markets, tougher lending…
Corelogic’s Tim Lawless recently predicted that in 2018,
“We are likely to see lower to negative growth rates across previously strong markets, more cautious buyers and ongoing regulator vigilance of credit standards and investor activity”.
There’s a turn in the tide and you want to keep a step ahead in the game so you make smart buying choices.
Here’s the low down:
The Australian Prudential Regulatory Authority (APRA) is clamping down on banks to restrict some types of lending. Interest-only loans and loans close to the value of the property are now harder to come by. So, if you’re a little short on deposit you may find you’re limited when it comes to lending options.
The good news is state government stamp duty discounts were introduced back in July 2017 (NSW & VIC) making property more affordable. And in the 2017-2018 budget, the government introduced the First Home Super Saver Scheme, allowing first homebuyers to access their super as a deposit on a home. To find out more, visit budget.gov.au.
And believe it or not, there are some positives to tighter lending regulations. Restrictions on interest-only loans forces out investors and banks give more favourable rates to owner-occupiers as they compete over a smaller piece of the lending pie.
Interest rate hikes
We can hardly complain… Interest rates have been at historical lows for well over 12 months now. But the low spell could be coming to an end with many economists predicting rate rises over the next few years.
So when calculating your borrowings, it’s not a bad idea factoring in potential rate rises so you know you can afford your repayments for the long-term. Most lenders automatically add 2/3% when assessing your loan application anyway, but it’s a good idea to understand your own budget and limitations.
Changing market conditions
There’s a lot of talk about the real estate boom being over, especially for Sydney and Melbourne. Economists are predicting Sydney’s housing market will drop between 5% and as much as 10% throughout 2018, with Melbourne likely to follow suit.
But according to Yannick Ieko, a property strategist at Smart Property,
“Each suburb has its own cycle. So while Sydney overall may be showing a decline in property prices, there will be pockets still experiencing growth. And demand varies according to type of property. Right now, Melbourne’s apartment market is due for a correction, while single-dwellings in many areas are still in demand”.
Investor or not, Ieko believes you have to become an expert in the location you want to buy in. He recommends at least 2 months of research to get a feel for a market.
“When you do your own due-diligence,” he says, “you get a sense of the local market and what properties are selling for. When a market slows, auctions become less popular with real estate agents preferring to use private sale. This is because auctions expose the level of interest in a property with the number of people attending and bidding. When interest levels are low, agents push for private sale.”
Ieko warns this is where inexperienced buyers can get shafted.
“They’re playing straight up against the real estate agent. Private sales are less transparent than auctions where your competition’s right in front of you. When it comes to private sales, you have to take an agent’s word for it when they tell you they’ve had another offer. At least if you’ve done your research and have a sense of the local market, you’re less likely to get shafted on price because you know a property’s worth.”
Tools to help you evaluate a local market:
REALas provide a list of local properties up for sale and their predicted sales prices.
Realestate.com.au offer free property reports and suburb snapshots including median house prices and an indication of supply and demand.
Buying property in 2018 is going to take careful consideration, research, perhaps even some professional advice. If you’re a first homebuyer, this could be your year to get a foot in the door!
At the end of the day, not even the experts can know for certain what we’re in for. But if you do your own research when it comes to your borrowing and buying options, you’ll make wiser decisions and reduce your risks.
Disclaimer: This article is general information only and is intended as educational material. REALas nor its associated or related entitles, directors, officers or employees intend this material to be taken as advice either actual or implied. You shouldn’t act on any of the above without seeking qualified advice, which takes your individual circumstances into account.