With rates rising so steeply, wondering if anyone (who has their finances sorted) is looking to buy their first house, upgrade your house or look for an investment property in this current market?
The advice I've always been given is, buy when you can and not time the market.
Even though I'm in a financial position to buy an investment property, the market just seems so gloomy and risky at the moment.
First home buyers, investors, or families looking to upgrade, let me hear your thoughts!
Buy low, sell high that’s my motto
But it is gloomy. If you are investing for the next 12 weeks, it might be too short a period to consider!
You think this is low? hahahha
Australian house prices are quite low if you compare to the cost and risk of building an Australian house in this environment.
Alot of near new homes are selling below the cost to replace.
Don't think houses have been low (read affordable) in a while.
When I bought my first house (or the next one) I never cared or thought about if the value of it was going to go up or down in the future, I just wanted my own home and that someday would be paid for.
Yes its worth more than I paid for now but it makes no difference to me, If I sell it Id still have to buy in the same market.
This!
Like any generally stable investment (Vanguard ETFs, HISAs) time in the market is better than timing the market. Naturally way less risky but I've got a lot of capital from regularly buying shares, whether the market was strong or not.
The market is less risky than you may perceive - your borrowing capacity has gone down because interest rates are very high, meaning if you can afford it now you're likely to be able to afford it later (including payrises, lower interest rates etc.)
I probs sound like a REA but yeah you should be fine. People holding out for pre-covid prices will be waiting for a long time I suspect…
After the bankruptcies?
Fair enough, I haven't been keeping track of him over the years.
Cheers
No offence, but that guy is a total hack.
We shouldn't listen to his message or people like him, there are far better and wiser people to pay attention to. Like listen to Carl Sagan instead, and focus on being an all-round better person. Don't be a sheep who follows those hacks, or become a cheap hack yourself.
I've listened to some of his videos and very little of it makes any sense.
his advice should be "in order become rich, start a get rich quick scheme and sell your nonsensical courses to some poor sucker who is trying to improve their financial situation"
exactly. if this guy is so successful then why does he need to tour the world giving speaking tours? you'd think he'd just sit back and enjoy the lifestyle, especially as he espouses the benefits of "passive income"
@DJR9000: Because he loves to help^ people.
^ help.. fleece.. scam.. same same.
"The rich don't work for money. The rich don't pay taxes. A house is a libility…. blah blah"
Not really sure how you're suppose to accumulate wealth to earn enough passive income to live off without working. Banks don't really lend to you unless you have cashflow. And then don't pay any taxes when they are rich and cashflow positive?
I've seen some tiktok/FB finfluencer and most of them spout rubbish. "Buy property on 10% down payment, wait for property to increase in value, refinance with larger loan and withdraw the 'equity'. The withdrawal is tax free" … Technically tax free, but you gotta pay it back at some point lol
He came out with one good book, but that was a long time ago…
look at you, drowning in downvotes lol
It really depends on your personal circumstances. If you find the right house and can afford the repayments then buy it.
For an investment it depends on what you want to do with it. If it’s to flip in a few years time then maybe it’s not a great time to buy but if you have a long term plans for it (I.e 15 years plus) then my point above applies.
Personally, my purchases have been long term and in an ideal world not having to sell so affordability of the loan would be my concern in the market.
The thing with a declining market is that supply also dries up which means that when a good house goes for sale you will have a high level of competition.
It's interesting with data and we can only speculate.
Shallow view:
From planning.nsw.gov.au: "The department is forecasting that from 143,400 to 161,300 new homes could be built over the next five years (2021-2022 to 2025-2026) across three scenarios." That's only 32,260 per year on 161,300 homes.
Sydney population growth is approx 1.3% per year, in 2021 - 2022 population growth for Sydney was approx 64,000. If only 32,260 homes are built per year, but the population is increasing, the supply isn't meeting demand and the prices of homes will always increase.
Other factors such as couples, singles, people want to move out from parents add to the new demographic of people finding a home………
I assume, if homes are not being built fast enough, we will always face a housing shortage no matter what.
You're not including all of those homes that always stay empty
But.. but …. vacancy rates is 0.
Rentals keep going up with more students / workers coming back in droves.
@dcep: I'm not understanding the relevancy
I'm just saying looking solely at population growth vs new homes built, isn't a useful comparison
@dcep: I don't understand why some people said vacancy rate is 0 while around my place I check realestate and domain there are still vacancies and the price looks the same since last year.
I can sleep to and from my work place in the train comfortably too.
If it's because it's an hour straight to/from CBD then I'd said people lost the benefit of living in a green place and prefer to surrounded in a tall, high rise building.
0 vacancy rate maybe in some area but surely not all.
you are assuming each person own a property or only one person living in per property
each property has probably 2-4 people living in it, some has more than 4 people, so 64.000 / 2 or 3 or 4 is easily meeting demand
Demand is one aspect.
But what the market had not been tested against is affordability.
At some point, private borrowers need to be able to afford the interest payments at a minimum, and if they're buying as an investment then renters need to be able to afford the rent.
Even the 'sage advice' of estate agents "You need to be in the market. You buy and sell in the market" was fine when there weren't real consequences because everybody was making money. Now there are real consequences and the platitudes of the list decade will come home to roost.
There has been a golden decade where this was simple maths. Money was cheap and balancing the equation was easy.
The resulting ballooning house prices are a big, big problem with interest rates just a few points off the lows of the past decade.
I think this is a big problem. Even with a minimum deposit, a lot of people who have bought in the last few years have a fundamental affordability issue when they come off fixed rates.
Spot on.
Rental properties are in very high demand in some areas, and competition is driving up rental prices even further.
In the housing sales market, it seems like 'average' properties in some CBD suburbs are staying on the market for a lot longer than they were even four months ago, whereas at 2% interest rates most CBD properties were getting snapped up at or above market price, even if they weren't anything special. Borrowing capacity has dropped for a huge amount of buyers, so the market pricing will need to match buying capacity/loan capacity. Hopefully less home investors with 10+ properties, and more homeowners purchasing can balance out the market.
A lot of families will be struggling to make ends meet, but will be holding onto their home with everything they have to ride out the storm. It's going to be tough, and hopefully we can all start to band together as communities again to work together when times get tough.
The thing with a declining market is that supply also dries up which means that when a good house goes for sale you will have a high level of competition.
A good house will have competition in a rising market. Moral of the story: good houses always get a premium.
You already answered your own question: "The advice is I've always been given, is buy when you can and not time the market."
No one can predict the future, and no one can take historic data and successfully guarantee to buy in X time.
If it's an investment, people think property investment is a guaranteed way to secure future profits, but it's not… investments is always a gamble at any point of time.
You may ask yourself in the future: "oh I should have bought it 5 years ago, 10 years ago, 2 years ago"…. or "damn, I purchased my investments at the right time, lucky I did"…. there is no guaranteed outcome, you take the risk and if it pays off, well, great, you won.
The same answer is in stocks, when is it a good time to invest? At the dip? Sure, but 3 years later, if you didn't buy, the "dip" point now is at $6 per share when 3 years ago it was at $4 per share at the dip…..but you hesitated.
Personally, if I had a stable income for a loan, I would have purchased my own home by now…. whether it's during the pandemic, 5 years ago or now. The only regret I have is that I didn't purchase the unit my brother and I were living in, we had 2 chances and we were both happy renting. This is around 2006 where I wasn't educated on investment or properties, not like now where even Gen Z are investing their time and energy researching property and how to own something with the wealth of amazing information they have online.
but the thing to consider as well is, should you put your money at the crazy property market where prices are inflated, or just deposit it into a Term Fund account for a year and let it grow? Imagine the term deposit interest rate now at an all time high as well! Easy money for 1 year!
That's the golden question right? Should someone buy property now or later? Or keep it in a high interest account or term deposit account? That's if you have a nice healthy savings amount. I mean, 100k of savings in let's say a uBank savings account will only get you 4.5k in that year (if interest rate stays the same for the year), is it worth leaving off the money for a year and wait until someone feels it's the right time to buy property?
In my opinion, with the RBA raising the cash rate, and I assume they will be raising it again next month, people's borrowing power will be lower thus less home being purchased thus home prices may go down(?)
just calculated my returns for a $160k dep to term fund @ 4.02%, yielding $6.5K!
@brendanm: For units and townhouses, they normally don't appreciate within 5 years, price would normally just go up and down, unless the same migration event happens again from state to state.
I've seen the history of some of these units, took at least 10 years to appreciate for little gains.
@kiwiyonip: Units and townhouses are garbage, I'm talking about actual houses. It was also a rhetorical question, as someone else paying off your mortgage means you end up better off than getting 4% (less than inflation) in a term deposit.
@Jackson: They are everywhere. The value is in the land, if you don't have the land, you don't have squat.
@brendanm: Ahh, not true, speaking from experience, I totally have squat. Buy in a blue chip area anywhere in Sydney or Melbourne and units are going for 1.5m and always rented. You can't blanket rule this thing.
Units in the east of Sydney have gone from around 400k to 1.3M in about 17 years. That's 3x, which in line with doubling every 7-10 years.yes houses will perform a bit better but your 7k first home buyers won't get you very far there.
@brendanm: The land isn't the only thing that has value, tha banks, government and I disagree with you, along with everyone else who lives in these areas.
On a side note it could be argued I own some of the land because it's owned by the owners commiteez of which I am part, but that's irrelevant. Value is ascribed to units. You aren't going all sovereign now are you?
@Jackson: You can't even do anything to the thing you "own" without asking the permission of others. Land is the thing that is scarce, and has value. The building depreciates, land appreciates.
@brendanm: OK I will take it that since you changed the subject from value to the inability to do anything with it, you have accepted the value inherent to units.
Also you can do things with it, I did heaps of things with mine, it's harder if you are a renter but if you own you can do just about anything beside changing the layout. Technically you could change the layout with appropriate beams but it wouldn't be worth it in most cases
@Jackson: As I said, the building itself is a depreciating asset, and you don't own the land. Heck, you don't even own the building, as you have to ask permission to do anything with it.
@brendanm: From the history of these townhouses in and around Brisbane, after being owned for 10 years, some of them lost around $80k on sale alone, imagine the top dollars they paid for body corp and council rates!
@kiwiyonip: But if inflation is running at 8 or even 10%, in real terms you'd be going backwards. Better off to pay down any debts you have imo
I negged you because this is a trap I fell into as a young person.
I could get 6% on a term deposit, assured, or the whims of investments.
Real estate looked expensive then at 5 or 6 times annual wages, an all time high.
But buying a house with a 10% deposit gets you 100% of any gains, and if it dips a bit, no big deal if you can ride it through for however many years.
I don’t believe the housing market can double again compared to incomes, but I do believe that it can double again including some wage growth/inflation that you won;t be compensated for in ‘safe’ investments like bank deposits.
Yep, a house is okay, always appreciating. But I can only afford a unit or a townhouse in this overpriced Brisbane market, so my term deposit potential gain is against that type of property. What I'm saying is the gain from bank investment vs. definite loss due to body corp fees and council rates with no guaranteed increased property valuation on this type of dwelling.
Spot on. Simple analysis and well written. I am thinking if I should purchase or not and your post made a lot of sense to me. Thank you.
@justanick: As long as you can cash flow it. Mortgage is higher than rent repayments.
Also, dont assume houses always go up in value. They might stagnate for a number of years, in which case you would have been better off renting and investing the surplus into stocks.
There are also large entry(5.5%) and exit fees(~2%) with buying and selling this asset class.
*Stamp duty, agents fees
You may ask yourself how did I get here?
When a mummy and daddy love each other very much?
Or are very drunk.
And you may tell yourself, "This is not my beautiful house"…
You may find yourself behind the wheel of a large automobile
The short term may be unpredictable but the long term isn't. Houses will continue to increase in value at a much higher rate than wages are rising. This is inevitable because all political parties support massive immigration intakes. More people = more competition for a finite resource = higher prices. If you want to get rich, invest in housing and get a job that has something to do with housing. It's that simple.
Buy when you can worked for 15 years with essentially free money.
I think it's a very different story from here on, at least for the next few years.
wait for the market correction
When's that going to happen?
in a few months is what I've heard the most for the last few years.
I think it's been longer than just the last few years. From what I see, "house prices will be crashing" in about half the articles and "house prices soar to record highs" in the other half. Someone's eventually going to be right! lol
@bobbified: I purchased early 2020 and by about April everything went sky high. I'm definitely noticing a lot of the million dollar properties are on the market for a lot longer the last few months. Land especially.
I purchased early 2020 and by about April everything went sky high.
I don't normally look at the prices much so I could be wrong, but I thought there was a downturn during the covid period.. which started in March/April 2020.
@bobbified: Varies from state to state. In mine we had very few cases and went over 12 months without any local cases. It was later to hit.
Basically anything that was <$300k gained an extra 100-200k by the end of 2020.
@Clear: Land is on the market longer at the moment possibly due to how hard it is to find a builder (and other tradesmen) at the moment. While new home sales have dropped of a cliff, there is an enormous backlog of work to get through which has backed up since COVID.
@MetaphorOZB: Oh yeah you're right about that. Projects I'm involved in have gone from $8m to $12m in the course of 12 months. Building supplies, the whole lot have gone up and hard to achieve without government funding.
@bobbified: 20% drop due to over extended leaving the market.
Then Stagnation.
People can't afford to sell, people can't afford to buy. Everybody will know somebody who's been hundreds of thousands in negative equity.
It definitely helps to have almost the entire government (and their countless investment properties) working in your collective best interest as property owners. They'll do everything they can to avoid a correction.
2 more weeks.
Soon enough, but don’t forget inflation.
After you buy
After it's corrected. Clearly.
Doesn't seem like there's correction, greedy sellers are asking for top dollars, prices basically sky rocketing even with this cash rates lifted, this is basically just Auckland scenario again and again.
greedy sellers
😂 Would you sell something you owned at well below market value?
No, but around here i'm seeing a bunch of properties sit on the market not moving, with minimal price reductions. They want 2021 prices and aren't willing to sell for current market value. Some are sitting there since early 2022.
OTOH those that are pricing a bit lower (still not pre-2020 low) are selling in weeks.
@brendanm: "So" what? Of course they can ask what they want. People can be as delusional or greedy as they like, that's their right, just as it's a punters right to call them greedy and delusional for trying to flip a property for a quick buck and getting stuck with a long term speculation hoping someone will buy your bag for 2021 peak prices before you get liquidated.
????
In the housing market, 'Market Value' is only the price you got when you sold.
The problem of people who perceive loss when they sell an investment that's made multiples but they didn't 'spot the top' is one of the big problems that's caused this bubble.
When did the house prices ever go down?
Seen in several markets eg Eire's ghost estates.
Been monitoring the sales on some areas since I'm planning to buy mid this year, but prices are still outrageous even with the latest interest rate hike. As if these sellers think their properties are still worth its current price.
There's even one I've been looking at, owner bought mid 2021 for $225k, selling it now around $330k, and it's not even a house, it's a unit.
Really hope prices go down further at the end of the year.
Exactly what I've been seeing aswell. Good houses are still going for a premium and sellers expectations are still so high.
sellers expectations are still so high
For sure. There’s quite a few properties near me where they’re asking for well over what they’re worth. Similar properties are selling for ~100k less, and selling relatively quickly. The properties that are listed too high are staying on the market for months.
Same. I think this (now out-of-date) article hints at the problem:
https://www.afr.com/property/residential/the-suburbs-where-h…
First home buyers aren't goldfish - they remember what prices were before the pandemic.
The house prices in the few suburbs that have fallen below their 2019 values aren't easily accessible for many first homebuyers (St Kilda, Darlinghurst, Surry Hills). The suburbs where unit prices have fallen below their 2019 values often aren't desirable for units.
One that seemed like a pretty nice place perhaps suitable for FHBs in the list was Hawthorn but I wonder if the student accomodation changing hands cheaply is distorting the figures.*
For the rest of Australia, it's a pretty depressing picture (although maybe with a ray of hope in Brisbane apartments).
* Hawthorn was included in the unit price falls list
Sure some seller are deluded thinking they can sell for high prices, but it's also a sign that sellers are not desparate yet. Some might be listing high while they still have years (some locked in to 25/26 @2%) left on fixed rates, or have very small loans left and really are happy to ride out the market until they get their price.
Overall it indicates that the market is still relatively strong, for now. A few more rate cuts and that could change, but that's what people thought 3 rate rises ago and we're still here. The real tipping point will be how the fixed rate cliff is handled. I suspect (and i think RBA do to) that people on fixed rates have had a lot of time to ponder and prepare for the return to realistic interest rates, and will either have sold already (those occassional deals popping up since the first sign of rate rises) or are busy building their savings. It's unclear what percentage of those loans are truly going to be distressed when the fixed rates expire.
The only people who would be distressed would be first home buyers that purchased in the last 2 years. So I don't see average prices moving much at all.
I can't speak for how many are like me, but being a FHB in the last 2 years myself I can tell you not all of us are over-leveraged or morgage stressed. I'll be able to survive 8% rates with no impact to my lifestyle (except maybe putting off travel), and 12%+ with a big cut in my discretional spending, depending how long it takes to get there.
@Kill Joy: Yes likewise. Interest rate rises are chewing into the amount of money I can funnel into things like salary sacrificing into superannuation and additional mortgage repayments, but there are still quite a few percentage points that I could absorb on the mortgage interest rate before I had no choice but to curtail my consumption in order to make the monthly payment.
With the wisdom of hindsight I'm certainly glad I bought a place that met my basic needs instead of taking on another $250k of debt for a place that would dazzle my friends and family.
I've noticed the popular phrase now is "price readjustment" when they lost the asking price.
I just moved into my new home. The house was below market when I bought and still is. With the various incentives (of which there's no guarantee they'll be there tomorrow) and the fact I was paying rent and staring down the barrel of a significant rent when my current lease lapsed, it made sense. Affordability is no question, I'm only paying $200 a month more on house repayments than rent.
However it's important to pick your area, your budget and your requirements and stick to it. I looked at probably 50 houses and kept a spreadsheet of every property in the area to give my own values, ignore what the agents say. Didn't give in to the emotion at auctions where people went well over what they wanted to pay. I bought something that went under what was expected, due to the lull in the market right before Christmas and am very happy. If house prices fall 5% it'll probably just mean my house is worth what I paid for it. It's not perfect inside but fixups should stay under $10k. Get an inspection and make sure there's nothing fatally wrong with the property.
One thing I noticed is that all the talk of falling prices can be misleading. There has been an increase in the number of knockdown/rebuilds going on the market because no one can afford tradies. Used to be something a developer could split into 3 went with a premium, now they are priced down. Basically nothing sold under the price that maximises first home buyer incentives ($600k for no stamp duty in Victoria) no matter how shit it was. Houses that were fit to move into straight away with no work to be done were going 20%+ over the price range set (which is always lowballed, but not that much).
The house was below market when I bought and still is
What does this mean?
It's underneath a market, like South Melbourne market, and because the market has not relocated, it's still below the market
Sssshhh, don't let the whole world know I'm here.
It means I can write 3 long paragraphs of garbage and still somehow miss words.
Below market price. Basically what I paid is less than comparable properties when I bought pre-Christmas and what things are selling for now.
Yes