How First Home Buyers Can Benefit In A Falling Market

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Otto Dargan

labelCategory: First Home Buyers

Signs The Property Market Is Falling

Australia’s property market experienced its third straight monthly decline in home prices in July 2022, amidst a rising interest rate environment. CoreLogic data shows:
  • Dwelling values were 8% higher over the past 12 months, down from a cyclical peak of 22.4% in the 12 months to January 2022.
  • National home values fell by 2% in the three months to July 2022.
  • Total stock levels were 24.8% below the five-year average.
  • Total advertised stock levels were 4.2% higher across capital cities than at the same time last year, as properties are taking longer to sell.
  • First-home buyer finance fell by $496 million in June 2022.
  • For the week ending 7 August 2022, only 1,471 homes were auctioned. The number of auctions held was down 23.1% from the 1,913 auctions held last week and down 8.4% from the 1,606 auctions during the same week last year.
In the three months to July 2022, CoreLogic estimates:
  • Initial sales were 16% lower than the same quarter last year.
  • The median number of days on the market was 32, up from 20 days over the three months to November 2021.
  • The median vendor discount was -3.8%, an increase from the recent low of -2.8% in the three months to April 2021.

Why Should You Buy In A Falling Market?

  • Interest rates are tipped to increase over the next few months, which will probably reduce your borrowing power.
  • There is less competition in the market, since people are nervous about buying in a falling market.
  • You could benefit from a great offer from a motivated seller looking to upgrade or downgrade, move interstate or overseas, or someone whose family situation is changing.
  • It narrows the deposit gap so you can buy your home sooner with a lower deposit.
  • With a smaller loan, you might be able to avoid paying Lenders Mortgage Insurance.
  • Australian rents were 9.8% higher over the year to July, so renting until you can buy makes less sense. Instead of paying rent, you could be paying off a mortgage on your own home.
  • You will likely get a vendor discount as sellers struggle to find a buyer at their original price.
  • The property market has a cycle. Even if prices are falling now, in a few years they will increase, leaving you with more equity.
  • The First Home Guarantee Scheme has price caps. Since prices are falling, you might be able to buy in an expensive suburb and still qualify for the scheme.

Tips For First-Home Buyers In A Falling Market

Here’s how you can get bang for your buck in a falling market:
  • Get pre-approval for a mortgage to find out how much you can afford and reduce financing delays.
  • A pre-approval shows the seller you can purchase the home and lets you bid comfortably at auctions, as you know your limit.
  • Do not make lowball offers and bids to capitalise on the falling market environment. Sellers or vendors might disregard your offer; try to get a low asking price from a motivated seller instead.
  • Stay on top of your expenses and increase your borrowing power.
  • Try to build and maintain a buffer above and beyond your expenses, so you can keep up with repayments even if interest rates rise.
  • Calculate your repayments to make sure you will be comfortable making them.
  • Take the time to search for the right home.

How To Make Sure You Buy The Right Home In A Falling Market

  • Remember that Australia is not one homogenous property market. Every suburb experiences its own property cycle. Look at property prices, auction clearance rates, and sales numbers of the suburb you are interested in to get a better idea of the offer you should make for your first home.
  • Do not buy in an area with many similar properties or plans to build apartments and house-and-land packages. The sellers might reduce their prices, which affects the value of your home, too.

Should I buy now or wait for prices to fall further?

Waiting too long to cherry-pick the right time to buy might lead to higher interest rates or stricter assessments from lenders. Be ready to grab the opportunity and find your dream home. You’re not in this alone. Home Loan Experts’ mortgage brokers will be with you to guide you, whether you need help looking for a property or understanding the home loan process. We’ve helped thousands of people like you find their first home. Call us on 1300 889 743 or enquire online today.

About the Author

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Otto Dargan

Otto Dargan is the Founder of Home Loan Experts. He is involved in strategic and operational matters. He utilises his time in seeking... [Read More]

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