A year ago, aspiring Australian homeowners could borrow approximately 12 times their net income. Today it’s averaging around 7-8 times. This, combined with banks significantly tightening their lending criteria (due to the royal commission), and low auction clearance rates meaning buyers are sitting back and waiting for properties to “pass in” (not get sold at auction) and purchasing subject to finance afterwards, has put the Australian housing market in decline.
This has led many people to swap their mortgage ambitions for a slightly nicer rental and weekly avocado on toast. But are they right to do so? Surely the market will bounce back at some point. The multi-million dollar question is: when? How might a discerning buyer make the most of this situation? And how can you tell the market is on its way back up? To answer all this, and more, we spoke to Marty Fox, director and owner of Whitefox Real Estate.
— Financial Review (@FinancialReview) October 8, 2018
So, should you buy while the market is dropping? It depends on your financial position. As Marty says, “The old saying is: be greedy when others are fearful, and fearful when others are greedy.” So if you are in a position to buy; buy!
“Be greedy and watch the market rebound.”
However, Marty also says that whether or not it’s worth taking a punt depends on why you’re buying: “It’s important to know that if you are buying to make money, all the money is made on the purchase. If you are buying because you love a property and want to live in it; that’s a different story altogether.”
“Buying under market value is the key.”
If you decide to go for it, Marty recommends first home buyers look at older style apartments which hold their value. Also, to get an even better deal, “Look for properties which have been poorly marketed with uneducated agents.” To do this, he says, look for, “Non professional photography, agents who have done minimal transactions and properties which are not styled correctly for sale.”
Or, if you are particularly enterprising, call the agent with the most listings in the area you’re interested in and ask them what their properties are truly worth. How do you get them to share the info? As a real estate agent, Marty knows this all too well.
“Dangle the future listing as a carrot for them to assist you!”
Finally, if you are looking for indicators that the market might start to rise again, these are the signs Marty recommends keeping an eye out for: “Higher auction clearance rates, positivity in the media, new street and block sale records being broken, an increase in real estate agents entering the industry and interest rates decreasing.”
Got all that? Time to start saving.
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