The media are having a field day with interest rate rises and property price decreases. Bombarded with sensationalised news stories and seemingly scary statistics, many people lose their nerve about making their next property purchase. Yet, the reality of what’s happening in the market means now is actually a great time to buy property in Sydney or the surrounds if you can. So, why is this the perfect time to reach for your ideal next home? And why should you embrace, rather than fear, the current increases in interest rates?
Don’t miss the sweet spot for making a purchase
The cream has come off the property price increases that occurred over the last year, however, prices have not returned to pre-COVID levels and despite the media hype, I believe property prices may not decrease too much further. As a Buyer’s Agent doing the groundwork, I’ve seen prices drop by around 10% on quality properties. This largely represents between $150k and $300k depending on location. This means now is the perfect time to buy the property you desperately wanted but was out of reach just a few months ago.
Your dollar goes further today
Make a move to make the move
Don’t pause too long, though. During the run-up to the 2018 election, the property market slumped and people waited, predicting further price decreases. After the election, buyer confidence returned and bang, property prices took off again. Week on week, the hammer went down, and the prices went up! Buyer FOMO set in pushing prices upward quickly. Those who were waiting for the ‘bottom’ of the market missed the upturn and were unable to buy the property they could have bought during the slump…..leaving them puzzled and disgruntled.
Having been through this many times, I tell my clients to focus on their own situation and seek professional advice so they can make an informed decision about their personal circumstances.
“This is about you and about your financial situation, your lifestyle, your family, and what’s going on for you right now. We’re going to buy you a quality long-term property that will withstand the peaks and troughs of the property market and perform well in the long run. If you need to move or are ready to buy an investment property and you have analysed the risk, then any time is a good time to buy.”
Capital gain: slow and steady wins the race
Buying regret-free when interest rates are rising
If your financial situation is secure and your borrowing and repayment capacity is sufficient, then now is a good time to buy. Do it irrespective of interest rate increases. So, why do I make such a suggestion?
Interest rates are indeed higher and increasing but they are increasing from unprecedented historical lows. We have been incredibly spoiled over the last few years with many of us enjoying interest rates of less than 2%. Can you imagine securing a loan at 9% in the late 2000s during the GFC or repaying loans at 17% interest rates in the 1990s? While those were unusually high interest rates due to historical economic downturns, over the long term, interest rates generally range between 5% and 7% on average.
When you apply for a home loan, even if the current interest rate is 2.5%, the lender assesses your ability to meet the loan repayments at a higher benchmarked rate. Before you apply for a loan, it is good practice to calculate your repayments at the current interest rate but also at 5% and 7% and see what that looks like. This gives you an idea of the possible range of your repayments, and if the interest rate increases, well, that’s OK, because you know you can afford it.
This window of opportunity to your new home won’t last
Right now, property prices have decreased while interest rates have risen. But this market won’t last forever. Economic forecasts indicate that as the inflation rate slows, interest rate rises will potentially stagnate or decrease, and when that happens property prices will start to grow again….how fast they’ll grow is anyone’s guess, but will you wait to find out or dive in and buy now?
Buying now means that when prices start to take off again, possibly as early as next year, you’re already in your dream home or owning a great investment property, with the value of your property going up, surfing that capital growth wave once more, watching while others scramble to buy as FOMO begins to set in again.
Your quality of home and lifestyle matter
Media opinion about the Sydney property market is usually a generalisation. Many people simply don’t understand the dynamics of the real estate market because this type of media hype promotes fear and certainly ignores the reality of ‘markets within markets’.
The areas that consistently perform year on year in terms of capital growth and value, the blue-chip properties, always hold their value. In Sydney, this means the Northern Beaches, the Upper and Lower North Shore, the Inner West, the Inner East, The Shire and increasingly, the suburbs surrounding them.
People always want to live in these areas and while these areas are not immune to property cycles, they have performed well historically and are likely to continue to perform well in the long term.
Ignore the hype and focus on your specific property goals
You’re better off putting the news sources aside and working with a property expert to research and understand the market you actually want to buy into. The reality of what’s happening in the market means that, with the right professional by your side, now is an incredibly good time to buy property in Sydney if you can.
Get the right team around you to support your property purchase and make an informed decision. Let us help you secure YOUR dream home or investment property. Book a FREE no-obligation call with an Essential Property Wealth Expert today and take advantage of this dip in property prices while you can!
If you need assistance with your home loan contact an expert mortgage broker today.
