This week, the RBA kept the cash rate on hold at 2 percent. While this is good news for mortgage holders, some buyers are starting to struggle with the growing property prices.
This week, the Reserve Bank of Australia (RBA) kept the cash rate on hold at 2 percent. While this is good news for mortgage holders, some buyers are starting to struggle with the growing property prices, particularly in major cities.
According to the NAB quarterly residential property survey, the national house price growth is expected to hit 4.4% percent by the end of 2015, with Sydney predicted to reach 7.7% growth.
SQM Research’s Louis Christopher believes Sydney is entering dangerous ground when it comes to housing prices.
“The Sydney housing market is as strong as I have ever seen it. Our revised forecasts of 11 to 15 per cent price gains, up from the original 8 to 12 percent, now is looking very conservative. The action now suggests movements of greater than 20 per cent p.a. at least for houses. This is dangerous stuff.”
Other capital cities are expected to see price growth, but not as dramatic as Sydney. Melbourne is predicted to reach 6.2 percent by the end of 2015, Brisbane at 3.8 percent, Perth at 0.7 percent and Adelaide at 0.4 percent.
According to chief economist, Alan Oster, while Sydney and Melbourne prices will start to slow in 2016.
“Average national house price growth is expected to moderate in 2016 to 3.4 per cent, largely reflecting our forecasts for rising unemployment, sluggish household income growth, affordability concerns — especially in Sydney and Melbourne, cost of living pressures and still high levels of household debt,” he said.
So what can you do to help cope with the rising property prices and get into the property market sooner?
Change the destination
This may be difficult to do if you have your heart set on a certain area, but if you want to buy in a 'hotspot', particularly a capital city, it may take you a very long time and could be very costly.
Take some time and do your research about areas surrounding your 'dream suburb'. Often properties in suburbs only 10 or 20 kilometres away are significantly cheaper. The State Custodians free online Property Report provides a 9 page report detailing recently sold properties, rental yields and statistics for specific suburbs across Australia. This will give you the facts straight up, without any bias.
Become an investor
While your dream may be to purchase your own home to live in, it may be difficult to do in a hot property market. Buying an investment instead can have long term benefits and help put you in a better financial position.
For example, you may find an affordable property that is not in your ideal area, but, as an investment property, are perfect. Finding a property that costs less may be easier if you are not planning to live in it, potentially making loan amount and repayments more affordable. So although it may take a little time to find your dream home to live in, by buying an investment property, you are getting your foot in the door and will be able to reap the rewards later down the track.
Consider a 'renovator's delight'
With the help of reality TV shows, the way people view renovating has changed quite a bit over the past few years. Properties that used to be considered dumps are now being snapped up by keen renovators and then fixed up and sold for a profit.
If you have a renovator’s eye and can see opportunities over problems, then consider looking for a renovators delight property. Not only will you be able to try out some home improvement projects, but you can also use the property’s downfalls to help negotiate the property price down.
However, be wary about how much work is going to be involved. While you may be able to get the property for a bargain price, if you are not willing to put in the effort or don't have the finances to do so, it could put you in debt and end up costing you more than expected.
Spend more time saving for a deposit
At the moment there is a lot of competition within the property market and it can become frustrating and disheartening if you keep missing out on properties.
As mentioned above, some industry experts believe property price growth will start to ease in 2016. So, you may want to consider spending the rest of 2015 putting your time and effort towards saving for a larger deposit. Instead of spending every Saturday and Sunday house hunting and at auctions, you could take on another job and put a few extra hundred towards your deposit each week. Weekly savings can also get you used to making mortgage repayments once you purchase.
Then, when the market starts to cool, you will be in an even better financial position and may not be faced with as much competition.
If you are searching for properties, it is advisable to have your finances pre-approved. To get a quick indication of how much you can borrow, try our Instant Online Pre-approval. It takes less than 2 minutes and gives you information on the interest rate, repayments and how much you can lend. When you are ready to apply for a formal pre approval, you can do so from your lounge room using our Online Application. Remember help is only a phone call away so call 13 72 62 to speak to a Lending Specialist.