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!
You can overpay for an xbox series x by spending $2,000 on it, you can underpay by paying $200. This is despite it being the value at that point in time that both parties are willing to transact at, because there is a wider market.
Houses exist within a wider market of other properties, it is possible to pay under or over that market price. There are likely other people who were willing to pay more, especially since they paid more for other similar properties, but for whatever reason they didn't make an offer (whether due to the timing being near Christmas, that the auction was cancelled or they were focused on offering on other properties. There was one other person interested who pulled out because they bought another house).
@freefall101: REAs have been feeding us BS like "This house is on offer at 10% below fair market value". That means nothing.
The people who pulled out were likely offering more than you and felt they were paying too much. If the agent accepts your offer, that's the market price, and it's not over or under.
@soan papdi: While that's what they said, I think it's clear he is referring to average market price for comparable properties however defined. If you walk into a carpet shop and get swindled you're not paying "market price", you are however paying some value at or below your marginal benefit. As an economist would say, a given sale in the market is not at equilibrium, but the market on average is.
But remember, he also interviewed every buyer on that spreadsheet and they were happy to tell him that they paid over what they wanted to.
It sounded though like the OP was referring more to getting an investment property.
If you are ready to buy one then buy one. House prices may fall in the short term but will raise again. This is how it has always been. The government policies like negative gearing always support investors that fuels these house prices. Most politicians and their mates have huge investment in houses they will not accept a loss. The houses prices will never crash and there is no correction. There will never be enough supply of affordable houses for all Australians.
Currently looking to purchase IP in Perth. It's just my opinion but if you can afford to buy & hold long term then now is a good time. Once things stabilise then you will be competing with everyone else again. I wouldn't be taking chances or over leveraging myself though.
Not really a good time, house prices still very high, while interest rates rising as well with no end in sight…
The end is in two to three 25bps rises if not earlier.
the market just seems so gloomy and risky at the moment
Great. Buy in gloom, sell in boom.
Make sure you don't overpay, especially for a lot of structure (new, done up) at the expense of land (size, location).
You can’t not overpay at the moment
This market is good for cash buyers.
It is, those who weren't able to get into the housing market and able to save a couple of years ago, are taking the opportunity. I really believe those closed deals recently involved cash buyers.
While the Reserve bank and its Commercial bank buddies have been running a combination of the South Seas and Dutch Tulip Bubbles, Joe Average still has the same repayment capability regardless of the interest rate.
So if he could afford $3000 at 3%, he can still afford $3000 at 6%. That would be half the loan.
Sure, this simplifies much more complex borrowing structures, but that's the way the banks like it, with all their pea and thimble tricks
Sell now, buy when prices finish falling.
The cost of renting will be subsidised by much lower prices.
you sounds like a renter who has been waiting for the market to crash for 20 years
But why?
If mortgage rates keep increasing, it makes houses a poorer investment, and at the edges there will be a few forced to sell.
But with strong labour demand, who is really being forced?
Investors might reluctantly sell crappy off the plan apartments at a loss, but nobody will sell their home at a loss if they aren’t forced to.
And rents are rising stupidly - the rental market is not somewhere people would willing choose.
All that doesn’t mean I don’t agree housing prices are too high and they should be lower for the good of the country. I just don’t see the mechanism for anything sizable except wishing and hoping.
To clarify my renting comment, I was not suggesting rental as a choice, but as a tool in leveraging your best outcome in the market.
Experts (people who say what they are paid to say) suggest 10% fall in prices.
Say you want/need to sell your house, and think it is worth $1,000,000 based on your own research. Ignore the Agents. They say what they hope will get your signature.
The Experts suggest it will be worth >$900,000 in a year's time.
If you sell it for anything over $900,000, you may get to put it away at 4% until you rebuy.
If you rent in the meantime, that's a <>zero offset. Don't forget, no rates etc.
Then, at any given time, you can make outrageous offers for whatever you want.
@Clickbait: If you need to sell your 1mil house, your probably have less than 20% equity and the interest is killing you. So you sell, lose 2-3% of property values in costs, moving and bond, need to save another 5-7% to pay for your next stamp duty/legals etc. On the rent side: pay rent, start up costs for new connections is utilities etc. Then when you are ready, spend 100 hours or more looking for a place to buy, then you buy it, break costs on rental, moving, new loan, connections and fix ups. Isn't as simple as you say unless we have a 30% plus correction.
@serpserpserp: But it is that simple. Complications are designed to paralyse your thinking, and to follow the banksters playbook/
Look what you have written, a dozen reasons to justify doing nothing. The whole world is doing this. How many are winners?
Set your mind free.
Yes?
No?
Maybe?
OP, seriously - what would you logically worry about what anyone else does or atleast claims to do??? Look at ONLY your own personal situation and make an intelligent decision based on those variables alone.
The advice you got about trying to time ANY investment market is sound BUT the fact you're asking on here of ALL PLACES tells me, you should not buy. Your risk profile at present is not ready for such a commitment and so you should focus on self education until which time you feel a chice suits.
Perhaps second half of this calendar year.. as that's when those 800,000 people will finish their fixed rates.
do you think 800,000 people are immediately going to sell when their rates expire?
Give it another 12 months and some won’t have a choice.
I’ll be very surprised if the RBA isn’t slightly loosening rates in 18 months.
They will go a bit too hard, get spooked by slowing spending, and signal stable rates, maybe a little cut.
@mskeggs: Slightly loosening rates won’t make a difference. Typical minimum mortgage is >$500k, more likely >$600k for anyone that bought since mid-pandemic. $500k x 0.06 = $30k interest/year. Add on $2.5k rates, $1.5k water, $1-$2k insurance, and you’re above $35k costs per year (minimum), not including repairs/maintenance, cleaning, electricity, etc. This is not including principal repayments. Add on principal repayments and you’re up >$50k costs/year minimum. That is insane.
Compare that to the median household income, and housing is definitely unaffordable in Australia.
I would say less than 50,000 would be in mortgage stress, and less 1000 would be stressed enough to sell
Definitely not.
do you think 800,000 people are immediately going to sell when their rates expire?
God I hope so.
If you’re looking for a house to live in, and have heaps of savings (>40%), doesn’t really matter when you buy. Just buy when you find your perfect house. But if buying for investment and not much savings, very bad time to buy in my opinion. House prices have barely dropped, interest rates are high, house prices could easily drop further. Seems too risky, and why take the risk? Enjoy your life risk free.
Don't follow boomers and buy property for investments. it's what has screwed this country over.
Buy some shares, a much better investment
I started doing this this diligently about 5 years ago, right out of uni. Would have been so much better off if I'd followed the masses and bought a house or 2.
No regrets, point is there's never a right answer, only luck.
Bank shares?
AMD
Leverage.
Just sold with a stack of offers. Definitely plenty of people still wanting to buy (investors, FHB and rental > OO)
The bloke who bought ours, it's his second place. Rents are so strong, he'll be just able to negative gear.
It really depends where and what you're buying. I'd steer clear of apartments, strata and anything weird like that.
Anything within 10kms of a CBD will always be good value long term. As always, you look for the dumps in the good areas. Plenty around.
I have the deposit but I am uncertain about long term job security.
"Should You Buy a House in This Market?"
No you should not. If you can afford to wait you will save money. I'm referring to east coast capitals here but the advice probably holds true for other areas as well.
For the last few years the primary driver of real estate prices is interest rates. Rates down = prices up and vice versa. All of the central banks that I have seen recently are publicly stating that rates will continue to rise until inflation is brought back to their target range. eg. The RBA aims for between 2 and 3 percent on average. The result of rising interest rates over the last few months is clear for everyone to see. As a rough guide I would suggest that changes in interest rates take c18 months to be fully priced in to the markets.
A very high immigration rate does not change the above. What it does do is create a situation where we have additional demand for homes. But increased demand does not equate to increasing prices. It does mean that many people will have to spend as much as they can afford. And there's the rub, people can only spend as much money as they have access to regardless of what the prices are.
How long do you think we should wait?
Until just before the RBA announces they plan to cut rates :) (I'd love a crystal ball).
@900dollaridoos
Nobody can say for certain but my rough guide is 18 months after the last interest rate hike and possibly be ready to move if the RBA starts lowering rates.
Predictions for where rates are going in the future are notoriously inaccurate. Having said that the majority opinion amongst economists is that the raising cycle has not ended yet. And central bankers have said as much.
My guess is that eventually central banks will hit the pause button and watch how things play out. There may even be a slight cut in rates but the days of ultra cheap money are over. This will cause a repricing in all markets, not just real estate.
No, if you have enough cash for an investment property, then you're pretty well off. Why compete with people who are just looking for a place to call home? It's frankly disgusting when there's a housing shortage at the moment and you'd be taking advantage of people's need for a roof over their heads.
Invest in some start ups, shares, crypto, nft, art work whatever.
It sucks, but if individuals don't get IPs, larger investment firms/corps will pick up the slack anyway.
Yeah i think most (not all) IP owners are scummy, but they're still usually less scummy than the bigger investors IMO. (I'm a renter myself)
Should I buy a house in this market?
No, I'm still paying off the first one.
There are plenty of good buys for those that are well off finanically and can invest without overleveraging themselves.
i.e. Nearby suburb that i'd love to be able to buy a block and build our 'dream' home on.
700m2 blocks with dumps on them used to go for 1-1.3M with developers jumping on them in a heartbeat.
One just sold last weekend for 806K. This was the 3rd one i've seen go this cheap. Have seen similar sales go for 755K and 900K.
You're probably looking at 3-400K build depending on how big/much you want in it.
Then have a property that would sell for 1.5-2M.
They say "The rich get richer and the poor get poorer during a recession" and it certainly holds true.
You will have to wait for builder costs to return from the moon, likely a couple of years at least.
You are not paying 300-400 for a knock down rebuild. People are paying 300-400k on a cookie cutter low quality project built home in new estates, located practically rurally with zero infrastructure.
For a knock down rebuild, you're paying double to what you have quoted.
Really? I must be way out of touch with how inflated the costs have got over the past 6 months. That build figure was from getting quotes in September last year from private builders.
My brother in law is a builder, and he said for a decent quality home don't expect much change from a million dollars.
with that quote you pay the deposit and never see the guy again
What suburb?
If it makes financial sense for you, sure, why not. I've been watching the market for a while and generally speaking, there are certainly more fixer uppers on the market than renovated homes at the moment and they are going for prices that have come off the peak. If you are looking for something to add capital value to, you should be able to get in with a relative low base. The renovated homes by comparison, are holding on in terms of pricing so getting one for a bargain is unlikely though the rentals for these are shooting up quickly so it might be great for yield and negative gearing. Whatever floats your boat.
there are certainly more fixer uppers on the market than renovated homes at the moment
That’s true. There’s certainly a premium on renovated homes as construction/renovation costs are high and you’re waiting a long time to get trades. Good opportunity if you have the skills to do all the work yourself though
No. The <Sydney> housing market should have collapsed 10 years ago BUT IMMIGRATION having 10 people living in a 3 bedroom unit AND insanely low interest rates saved it.
Those same immigrants paid taxes and worked jobs the existing citizens cant or wont do. Saved the economy more than they dented it.
"The jobs that existing citizens wont do" Ahh so you've bought into the corporate-immigration handshake which is enabled by the late stages of capitalism we are currently in. How short sighted of you.
Corporations are the only people who benefit from mass immigration because they are completely dependent on GDP growth. Society suffers, as obviously displayed in this country within the last 20 years.
I noticed you excluded the "cant do" part of the comment - i wonder why!!
So here is a real life example for you. The IT industry predicts that we need about 17,000 extra people with cyber security, identity management and application optimization skills each year for the next 3-5 years. Our unis and training institutions produce about 4,000 graduates each year. Immigration or outsourcing are about the only options we have or otherwise as you put it, society suffers (read any news on technology scams lately?).
And i dont know what constitutes as mass immigration but last time i checked… unless you're a first nations person… we're all here because of immigration. So rather than standing from the inside shouting out, perhaps spend more time thinking about how you can contribute to a better place for as many people as you can.
Oh and for transparency, i work in one of these so called corporations, and they pay me a decent wage, which i use to put food on the table and a roof over my family. Oh and some of the money they pay me go to taxes and they pay for social services that benefit those who need it. Pick your battles mate.
@FlyingMiffy: Lol I work in cyber security and that is completely overstated. It's nowhere near 17k as most shortages are within governmental departments. CyberCX has never been stronger in acquiring smaller firms. Also, cyber security is a matter of national security, and therefore only Australian citizens are usually accepted for positions based on the fact that they are eligible for security clearances.
And of course, the argument of "We're all immigrants" like comparing the days of the first fleet to now is somehow a good argument. This exact argument is used often, as well as calling the person opposed to mass-immigration a racist. The reality of the situation is that mass immigration, like we've seen in the past decades, has a large effect on wages as well as housing. Rural Australia doesn't benefit from it, and Australia is a coastal population which means we really don't have the infrastructure to support such intake.
I'm not even going to address the corporate bootlicking, as if your corporation cares about you at all as an individual. You are a gear set in motion to please shareholders. That's it.
@FallaM: Again you are very selective in your arguments.
Cyber security was one of a few i listed and yet you ignore the others… but i'll bite. Cyber security is not just for government, and negative vet 1 or even top secret clearance can be had by immigrants so im not even sure what point you are making…
Saying that mass immigration is a net negative impact on Australia is a big call, got any data on that? To help you get started, here are a few. 70% of total migrants are active in the Australian workforce compared to 65% of Australians born here. So if you took migrants out, you might need to work that second job. Closer to my heart is age care and childcare, did you know that over 37.1% of Australia's 300,000 odd frontline care workers were born overseas? If they werent here, not many people will have the luxury or be able to afford to work while they have young or old at home. Becareful what you wish for on immigration. Get your facts straight. Dont be a leftie or rightie because its convenient.
If we are talking about a reasonably long term PPOR, I’d not play the waiting game IF you can afford it.
Regardless of when you buy, I think you need to put your economic pessimist’s hat on and look at what repayments look like if the RBA consistently put rates up for the foreseeable future. I personally also look at the “what if” questions that apply to you:
What if I lose my job and am unemployed for 6 months?
What if I have an unplanned pregnancy and there is an extra mouth to feed?
What if I get sick and have tens of thousands of dollars in medical bills?
Etc. etc.
I found that helpful to calibrate the right price point where I was comfortable to proceed.
You'll get a whole host of 'yes' and 'no' answers as each person's situation is different.
As for me, yes, I will be buying - but I'm buying as investment to hold long-term.
I moved away from property investments and sold a few simply because the market was so hot at the time - moved to the share market when that was down. But property prices coming down-ish has caught my attention to this market (again).
for those people 5-10 years ago that said property prices were too expensive and is now waiting for a price correction, and advising people to hold off,
well now there is a small drop in house prices, but you also have higher interest rates, higher inflation, higher cost of living, rising rent costs, higher fuel costs,
housing affordability for some people is too late, unless you move out of major city centres or are willing to live in smaller accommodation.
as the economic conditions improve and rise again, guess what so will house prices,
The problem is no one knows how deep the bottom would be and when. You will keep losing capital until the market hits rock bottom but rental return is good as rent had gone up by at least 15% everywhere. Some places you can get a good 6% rental return.
The people telling you that the property market is at the bottom or close to the bottom are working in the property industry trying to spruik it. We had been reading that property will be rebounding over the last 6 months. I especially remember one of them came from the deputy premier of NSW claiming that they have data indicating that property will go back up at the beginning of 2023 and that you will be looked after by the government.
The advice I've always been given is, buy when you can and not time the market.
Yes this is it.
You'll find that people complain about the market irrespective of what it's doing. If the place is within your budget, just buy it, ignore the market and charge on. If it helps at all, the times when everyone is (more) upset about the market is the best time to buy due to decreased competition for houses.
People are going to start selling their houses in the latter portion of this year after interest rates become too much to bare.
Doubt it. We're living in a hodl mentality with investments these days. People would rather default on their other commitments than sell their properties and lose out on potential future investment profits.
The rba is too scared to make drastic increases that would force their hand because the media would have their asses handed to them. They're already blaming the rba for the struggles of mom and pop multiple property investors who have to "eat in more often" and "shop more frugally".. 🙄
My advice to OP is buy a property if you plan to live in it. Stop looking at houses like a cash cow or your proposed retirement plan. That way if the market does tank (unlikely), you lose nothing because you're living in your house. That's what houses are for. Ironically.
yes, if you can.
My justification - we live once and you are wasting your young years while you are waiting for a good moment. no one will give your back your those X years.
Live now!
Only if you want to end up with a lot of negative equity.
'No one can predict the future' - The odds of interest rates dropping any time soon is very-very low…
I would not be buying a house right now unless you can comfortably afford more rate rises.
If you can afford it
Yes, if you can afford high interest rates and have a good cushion that will prevent you from defaulting on payments in the short term - 1 year.
if I recall when I bought my first house in 1979 interest rates were about 13%pa
but house prices were maybe around 4x average earnings
dunno current interest rates cos I stopped watching, but last I looked AU house prices were more like 9x average earnings
long term, owing your own home paid-off is the best security for retirement
e.g. our home in Sydney would rent for maybe $700pw
as we own it, our annual expenses are typically around $20Kpa plus discretionary travel (o/s now first time in 3 years)
if we were paying rent for it, we would need an extra $36Kpa - or a total of around $56Kpa not including overseas travel
which do you think is easier in retirement for a couple - $20Kpa or $56Kpa ?
owning your own home is the most important factor for financial content in retirement.
I've felt this way for a long time, yet i rarely see it mentioned. Some people actually buy the bullshit about superannuation being for us despite having no control over it, where i'd much rather put that ~10% into paying off a PPOR. I'd also rather see most people allowed to put it toward their PPOR, no doubt that would do more for the people retiring than having $45k of super sitting there after 40 years of fees and insurance they didn't need.
Really, does it cost $20,000 a year to own a house in Sydney that rents for $700 a week? Or is $20,000 a year your cost of living altogether, not including overseas travel?
total cost of living - lemme check my spreadsheet …
housing (paid off strata unit) - strata levies $4700pa, council rates $1200, electricity $1100, internet $700, water $600, insurance $200 = say $8500pa
private health insurance as couple $3000pa
restaurants probably $5000pa
shopping probably $3500pa
makes $20000pa as a couple
Damn that is cheap man. How much do you spend on food? Or shopping includes food?
I would suggest doing your own research.
Don't make decisions based on greed or fear.
One person who's opinion (perspective) I find interesting is Christopher Joye. He appears to know his stuff.
https://www.afr.com/by/christopher-joye-j7gce
https://www.livewiremarkets.com/contributors/christopher-joy…
His latest interview on Livewire was good:
https://www.livewiremarkets.com/wires/christopher-joye-the-r…
Also for current expectations for RBA cash rate:
https://www.asx.com.au/data/trt/ib_expectation_curve_graph.p…
This gets updated daily based on latest information to market.
Listen very carefully to Christopher Joye and then do the exact opposite.
If you have the cash and to buy outright, yes. If not, no.
monky can't afford groceries let alone new tree…
It's funny that people still say "they've been saying it'll crash for years and it hasn't" when it's in the midst of a pretty severe crash right now. It SHOULD have crashed years ago and values were silly removed from reality but the rigged housing market and policy propping it up has put it at stratospheric levels away from reality. Many underestimated exactly how silly it would get, but rest assured it's coming undone now.
The thing is the last 40 years have really just been a microcosm of ever falling rates building people's assumptions that "house always go up" or the "7 years" myth but now they have nowhere left to go. If they could keep cutting they would but they've hit the floor now.
Rates will get much worse than they are now as they can only really go up and it will leave a lot of people with their pants down. Trying to time the market is like trying to catch a falling knife, so if you're trying to do that you'll probably get burnt but there's gonna be a lot of pain once more fixed rates expire and more people are in -ve equity. I'm personally waiting until some more of that happens before I even look at it again
Depends..
If you're renting and looking at buying your PPOR, I'd buy now.
If you're living rent free and looking at buying your PPOR, I'd wait.
If you're looking at buying an investment property, I'd wait a little for more investment choice/prices to fall. Keep your eye out on the market. You're better off to pay more for a superior long term investment.
Really good advice.
Come back in a year and make the same thread. If most replies are NO, that is your sign to buy. Dont follow the herd.
Australia most expensive real estate in the world. This can't go on forever.
Interest rates going higher for at least 9 months.
Lag on interest rate hikes at home prices.
300000 immigration intake.
Building materials up
Tradies prices going up.
Builders going bankrupt.
So there's a few market forces saying prices up some saying down.
I personally believe prices will continue coming down for next six months then start increasing again.
So next 1-3 years prices may be fluctuating but in 30 years prices will definitely be up. So if investing or speculating short term you will lose but if investing long term you will come out on top.
I agree with most of what your points except "Australia most expensive real estate in the world."
While it is expensive, there's plenty of other countries/cities with more expensive land/house than here.
Broker here - yes you should buy in this market.
MWOHOHAHAHAHAHAHAH
drinks pint of blood
One needs to the look at the facts. interest rates have been steadily falling now since 1982 to the point where they got down to 0.1% (rba interbank rate). over that time property prices have increased in line with reduced rates. there are entire generations that have not seen a property market drop! but the property market is like any other market - it has ups and downs.
last year the mortgage rate for property doubled over the course of only 9mths! it is this percentage change that is concerning and has not happened occurred since world war II. so how will this affect things into the future - no one can know for sure but to me it is heavily skewed to property dropping very heavily indeed - something none of us have seen in our lifetimes including grandparents!
I agree with what you are saying, but I thought interest rates were up around 17% in the late 80s and early 90s? Not falling rates since 1982. Happy to be corrected if I'm wrong.
https://tradingeconomics.com/australia/government-bond-yield
have a look at the above graph and ensure to change the time scale to ALL.
this is the 10yr australian bond rate yield. not exactly the RBA cash rate but they always are in sync. it show a peak interest rate in 1982.
For your first home that you'd also use it as a residential purpose, I'd say buy it as soon as you can afford to have a loan.
property investors are conditioned to housing going up only but nothing ever goes up in a straight line
wait for capitulation then buy
I would not buy at the moment unless there was some compelling reason e.g. sold and need to buy again.
With the number of people coming off fixed rates in the next 12 months, the intended impact of the interest rate rises will start to be felt by many people who haven't yet felt it and sadly alot of people will need to sell and prices will fall - unless Albo steps in, which wouldn't surprise me.
There's catching a falling knife and then there's lowballing until someone gives in ;)
Buy if you can afford the repayments factored with another couple of more potential rate hikes. If you are waiting for prices to crash alot, it’s unlikely.
Many in capital cities are lifestyle hounds but cash poor.
Better to buy an ordinary plain stale listing at a sharp price. Drive an older car, eat reng.
And be out of the city.
Property prices will correct. At the mid to high end. Not he low end.
I bought a house late in my mid 30s.
The earlier the better. It's forced savings of you loss in it. Just be realistic.
Over time market driving policies, market supply, market demand and consumer sentiment on whether property is a good investment channel will all change. Personally I think the best way to look at the market for housing isn't to consider "will this go up or down?", the best way to purchase something is to consider "is this currently overpriced or underpriced?".
To get a baseline you could look at things like the price of housing in Australia compared to salaries vs other 1st world economies. Currently Australia treats housing almost as a primary industry and without prices continuously going up, the economy could be in real trouble. I would also consider that the older generation are more likely to consider property as a good investment channel and when their assets are passed down the younger generation are likely to sell them (especially if policies benefitting property investors change, which I think they almost certainly must). If property keeps being allowed to grow, it would be like allowing the dollar to contnuously inflate leading to trouble. Current governments are likely to pass this on until action is required, but it will be required eventually.
I give Negative Gearing another 5 years Max before it will abolished. This means Investment Property is not so appealing to investors now.
He valued his own house as undervalued. But a house is worth what's the other person(s) willing to pay for at that moment of time. Which is exactly what he has paid.