Home Values Hit A Record Low, How Can It Benefit Homebuyers And Investors?

Published by Otto Dargan on February 1, 2023

CoreLogic’s Daily Home Value Index (HVI) showed a record decline of -8.4% in early January 2023. Record-breaking price fall occurred less than nine months after the market peaked last May, and home values are expected to fall further in the coming months. The sharp decline in house values was recorded after the fastest rise in home values, 28.9%, from September 2020 to May 2022.


What Led To The Fall In Property Prices?

The leading cause of the declining home values has been frequent and fast-paced rate hikes by the Reserve Bank of Australia (RBA). A 300-basis point rise in the cash rate over eight months from May-December 2022 increased interest rates on home loans and decreased borrowing capacity. Also, the high inflation that led to the rate hikes has eroded household savings that could have become a deposit for home loans. So people can afford to pay much less for homes.


How Can This Benefit First-Home Buyers?

If you have the means to step into the property market in 2023 despite these challenges, then you can make the most of the declining home values. Among the benefits for first-time buyers are that you don’t need to save a large deposit for a home loan, and there will probably be less competition; Australian Bureau of Statistics data reported that the number of first-home buyers had dropped about 31% over the year to November. Interest rates are increasing, but if you can cope with the higher repayments for a few years, then buying a home in a falling market can benefit you in the future, when the market starts to rise again. Interest rates are expected to decline eventually.

The coming six months to a year is expected to be a buyers’ market. Homebuyers will be able to negotiate more with the vendor since there are more properties and fewer buyers.

If you need some help to get into the market, different government grants and schemes are available for first-home buyers, making it easier for them to enter the property market.

 
There are also many waivers and concessions that allow first-home buyers to save on stamp duty, lowering the initial cost of buying a home. The option to choose to pay an annual property land tax instead of stamp duty on properties valued at up to $1.5 million is available in New South Wales. The state of Victoria also offers stamp duty exemption on a home worth up to $600,000 and a concession on homes worth $601,000 to $750,000 for first-home buyers. In Queensland, first-home buyers buying homes under $500,000 are exempt from paying stamp duty. Stamp duty exemptions or concessions are available in other states as well; click here for more information.


How Can Declining Home Values Benefit Investors?

If you want to make a long-term property investment, the current market can also provide a good investment opportunity. As interest rates and the cost of living rise, many buyers’ confidence declines, and they are sitting on the sidelines. Investors can take advantage of the reduced competition and negotiate on price.

Strategic investors will make the most of the market’s opportunities. In a few years, the property you bought will appear cheaper. Most analysts agree interest rates are almost at their peak, and while inflation is high, the RBA’s efforts are expected to bring it under control by next year.

Amidst the rental crisis, an investment property can yield good rental income for investors. You can get a higher investment return if you buy when home values are low and sell the property later when values, an equity, start to rise.

As a first-time investor, want to know the signs that you are ready to enter the property market? Click here to read about them.


We Can Help?

Our expert mortgage brokers at Home Loan Experts will help you assess your situation, find the home loan that suits you the best, and determine if you are eligible for any available home loan grants and schemes. Feel free to call us at 1300 889 743 or complete our free online assessment form.