How to avoid this common home buyer trap
It’s no secret that some of the heat is coming out of the property market.
Home buyers are now under less pressure to make a rushed decision, and more homes are coming onto the market, giving buyers greater choice.
But holding off and waiting for prices to reach a low point may be a high-risk strategy – and it could work against you.
We look at the potential pitfalls of trying to time the market with the aim of buying when prices are lowest.
Prices are cooling – not tanking
First, a quick recap of what’s happening in the property market.
Home prices are shifting downward or levelling off in some areas, mainly as a result of interest rate pressures, stretched affordability, and tighter investor tax rules.
But these are far from ‘fire sale’ conditions.
As a guide, June saw values fall in Sydney (down 1.2%), Melbourne (1.0%) and Canberra (0.6%), Cotality data shows.
However, prices continued to climb across Brisbane (up 0.3%), Perth (0.7%), Darwin (1.4%) and Hobart (0.6%) as well as regional markets (up 0.3%). In Adelaide values held steady for the month.
How home values move in the months ahead is unclear. And frankly, not even the experts agree on this.
What we can say is that no one rings a bell to announce that prices have bottomed out.
And this is where those who put buying plans on the backburner with the expectation of further price falls can face key risks.
It can mean facing more competition if other buyers pile into the “weak” market, potentially forcing prices to rise again.
It may also mean missing out on a property that ticks all your boxes, just because you think you could get something a bit cheaper in a few months.
The risks of trying to outsmart the market
Right now, we are seeing a variety of property price predictions.
But past events have shown that forecasts can be inaccurate, sometimes wildly so.
In the early days of COVID, for instance, some tipsters suggested property values could drop by 10%, or even 20%.
In reality, home prices rose 24.6% within two years of the start of the pandemic.
Clearly, the situation is very different today.
But the basic rule still holds – we usually only know that home prices have reached a low point after the event.
The thing is, several of the main factors that have helped drive home prices higher in recent times are still in play today.
Australia still faces a shortage of homes for people to live in. And our population continues to grow.
The upshot is that holding out with the aim of buying when prices are at their lowest may sound like a sensible strategy.
But it’s a lot easier said than done, and it often relies more on good luck than good timing.
Focus on what you can control
The past five years have seen home prices nationally increase by more than 34%.
Those sorts of long term gains could eclipse the short term savings of today’s softer market.
So, instead of trying to second guess the market, it can be worth focusing on what you can control – and that’s your own home buying plans.
As mentioned, today’s market offers improved choice, and sellers who may be more open to negotiating on price.
Both are a plus for home buyers.
Talk to us today. You could be home loan-ready right now, and that could see you benefit from today’s more buyer-friendly market.
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