Making the decision to purchase a property is not easy at the best of times. Usually your property is one of your most significant investments. There are many factors to consider.
It’s even more difficult to make a decision when there is market uncertainty, as we are experiencing now. The political and economic situation raises questions as to what the future holds and many purchasers are wondering if now is the time to commit to a purchase.
There is no crystal ball, but here’s our take on what to consider when making the decision:
First, consider your financial situation. Above all else, can you afford to make the purchase? Even though there is talk of interest rates potentially dropping, the smart move is to ensure you can cope with your installments even if the rates went up by 2%. Give yourself the comfort of knowing you can cope with the worst.
Next, consider the reason for your purchase. There are certain conditions under which you would need to proceed, irrespective of the market. These include the need to scale down due to debt, the fact that you need a larger home for a growing family, or that a property meets your physical requirements i.e. single level for practical reasons.
Then you need to consider whether or not it is a sound investment. What we’ve seen in the past 3 months is that sellers are much more realistic with their pricing. Those that want to sell have listened to the market and made price adjustments. There are many listings that now represent good value, especially in developments. That means you can purchase with the knowledge that you aren’t overpaying.
Do you wait and see if pricing drops and there is better value later? That’s always a gamble. Whilst prices have steadied, there is no indication that they will drop. Strong demand results in stable values. If there is, for some reason, a significant drop in property values (highly unlikely) then you can also be certain there will be a significant change in the lending policies of the banks – meaning finance will be much tougher to get.
On the face of it what we are experiencing is a market correction. The correction is in the sense that the upward pressure on pricing has tapered off, not that property values have dropped. That means that when you make an offer a serious seller will look at the facts and consider a “fair market value” offer. And that’s great news for purchasers looking to make a sound investment.
Also important to consider is that many investors with cash are turning to property as the safest investment to make. Over 50% of our sales this year at Harcourts Platinum have been 100% cash. That’s a really good indication to purchasers that property still remains the most sensible investment vehicle locally.
The smart money is to buy now, as long as you can afford to.