With property prices surging in many areas around the country, prospective buyers may be worried about purchasing at the peak of the market. So, I wanted to remind you of a few property home truths that may allay some of your concerns.
More growth to come:
Most forecasters believe there is still price growth to come, as demand is currently showing no signs of slowing down. Westpac chief economist Bill Evans forecasts growth of around 8 per cent next year and a possible correction of around 5 per cent in 2023/4.*
Interest rates are still incredibly low, which means you can still borrow more cheaply than almost any time in recent history.
A long-term proposition:
Remember that property is a long-term investment. If you plan to hold onto your home for at least five years, and possibly ten years or more, you should still see the capital value of your property increase significantly. Property cycles ebb and flow according to economic factors. Even if prices slow or stall shortly after you buy, unless you plan to sell then and there, it doesn’t really matter – the property cycle will continue upwards at some point.
The timing must work for you:
You can’t always time the market. Other factors in your life – such as employment, marriage, children and other big life events – mean that you can’t buy property before you’re ready. So give yourself a break and don’t beat yourself up about ‘missing the boat’. It’s nigh on impossible to time the market perfectly – those who do are, largely, just very lucky.
Purchasing a property with good fundamentals is still the most important thing to keep in mind when buying. A key component of a good property purchase is buying a property in short supply in an area with high demand. High demand tends to come to markets with strong infrastructure (such as easy access to main roads, good public transport options and good schools), nearby shopping centres and entertainment options, good public leisure facilities and reliable employment opportunities. A limited supply of properties in this area will make these properties more valuable. So, be very careful about buying in areas where supply is increasing through new housing estates, new land subdivisions and increasing dwelling density, such as new apartment developments.
People who bought a substandard property in the panic to secure something this year are unlikely to benefit from capital growth over the long term. There are many stories of buyers who didn’t do their research, get a property inspection or even check the contract properly in their haste to ‘win’ a property.
So, keep your eyes on the prize but don’t buy into the FOMO – the cycle will come around again; it always does.