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Is Now a Good Time to Buy a House in Australia?

Note: This article is general advice only and should not be taken as financial advice.

Man on laptop researching a good time to buy a house in Australia.

Knowing when to buy a house in Australia can save a lot of time and stress throughout your journey.

Key Takeaways:

● You don't need a fortune, but every extra dollar helps

● Banks don't like risky buyers

● Timing ultimately comes down to your circumstances

The Australian property market seems to always been in a turbulent place. Whenever interest rates, and property prices rise or fall, every media outlet rides the hype train, then the stories start trending all over socials. It can be daunting, and the question is raised: 'Is now a good time to buy a house?'. It's a loaded question, but we'll do our best to cover as much as we can below.

Getting your finances in order

Like we cover in How To Buy A House, a great place to assess if now is a good time is to start by chatting to a mortgage broker to determine how likely you are to receive a loan from banks. Here is where you can assess your financial situation, which is contributed by a multitude of factors.

The main ones are your main source of income and any additional/supplementary income you may have. Also included are any grants that are currently available, such as the first home owner’s grant. Assets also contribute positively to your financial standing when seeking mortgage lending. Appreciating assets, such as any properties you own, and/or any assets you own outright, such as a car with no repayments). Debts and expenses are also accounted for. Credit cards, car loans, afterpay are some of the common culprits, but also taxes (of course 🙄) and any dependents you have, and any university liabilities such as HECS debts.

Ultimately it comes down to this: if you were to loan money to someone, you want to know, with reasonable confidence, that that person can pay you back. This is what banks are doing - they don’t like risk. Anything you can do to help minimise risk in their eyes will help you along the way. Are you responsible with your money? If you have debts, are you capable of paying them off smartly? Or are you maybe too frivolous with your credit and don’t live within your means?

When do I know I have enough for a house?

Managing your finances can be complex when looking through the lens of seeking loan approval. Even once you gain approval, you’ll have to manage the repayments for the next 20-30 years; this is a long time, so you’ll want to look at two things when keeping this timeframe in mind:

● Interest & interest rates

● Lenders Mortgage Insurance (LMI)

Charging interest is a given when loaning money - it ensures the lenders get something out of the deal, rather than just loaning money out of the goodness of their hearts. It’s also a useful accountability tool. The longer you take to pay off your debt, the more ‘extra’ you’ll have to pay on top; the other thing with interest is that it changes over time, depending on the market. So one year it might be lower, around 1-2%, but the following you it could rise to 4-6%, and you’ll then be paying off an increased amount as a result.

The best way to manage this is to reduce the time taken to pay off your mortgage by increasing your initial down-payment, your deposit. A good rule of thumb for this is to have at least 20% of the total house price as your deposit, so about $100,000 if your house costs $500,000. Having at least 20% means you won’t have to pay Lenders Mortgage Insurance (LMI). This is a lump sum that gets added on top of your mortgage, and it increases the further away from 20% deposit you have. It’s exactly what it sounds like - banks really don’t like risk, so they’ll tack on an extra fee as insurance for themselves if you’re under that 20% threshold. This doesn’t mean they don’t think you can pay off your mortgage, it’s just the bank hedging their bets.

But when is the right time?

Okay, so you have your finances in order - so when should you buy? Is this the right year? the right time of year? You might hear a lot about interest rates. There are few sentiments here:

● “You should buy when interest rates are high! That way you know you can afford it

and you’ll be so much better off when they drop!”

● “Interest rates are low! Now’s the time to buy while it’s really affordable!”

and other phrases very similar to these. Ultimately, nobody knows where interest rates will be in 6-12 months time, and the uncertainty only increases as you try to look further into the future. Yes, buying a house can be daunting, and you can feel like you’re not prepared for it, but there’s a difference between scary not ready. Determining when to buy based on the fluctuation of interest rates alone is not looking at the whole picture.

There exists a plethora of information for buying a house in Australia; online communities exist in places like Reddit, alongside many blogs and experts throwing in their two cents. 

Consider your personal situation - if you have children, perhaps buying and moving outside of the school year is best. Ultimately the best time to buy is when you’ve assessed and mitigated the risks involved in buying a house for your personal situation - have you got 20% deposit? If not, have strategised how to manage LMI? Have you projected your ability to make repayments if interest rates increase?

Buying a home will leave you with a heck of an asset, and will, in most cases, appreciate nicely over time. But a mortgage is still a debt, and it’s something you have to pay off. So Abodable do what we can to help with this when we give the commission back to the buyer, which you can read more about here. if you’re not quite at 20%, an extra $15-$30,000 can’t hurt. Or if you do have enough for your deposit, you can take it for when your home settles; if you need a new TV, bed, couch or just to replenish your savings.

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