When to buy property?

The Dilemma is increasing with the increase in interest rates in the  home loans. As the interest rate is increasing, the housing market has been decreasing. Housing prices are continuing to decline and falls are expected to accelerate in the coming months as well. Borrowers are in a dilemma whether to purchase a property at the moment in the current decreasing market, or as the prices are anticipated to drop down with time, is it worth the wait??

Property Price correction

If we look at the property correction angle, we can see that extraordinary growth in housing prices were observed over the past two years. There was an astonishing increase of 34% cumulatively since the pandemic onset in February 2020. Australia had ranked fourth on the global list of countries likely to have property correction.

Seems like the housing price correction has begun. Majorly, Sydney and Melbourne house prices have dropped to 1.6% and 0.7% as per the report of Corelogic.Banks and experts have already warned that the house price might drop by 20% across Australia in the next 18 months. As per Economist Carlos Cacho, fall in the house price of Sydney and Melbourne are likely to be larger and bigger, and this could be the largest house price correction since 1980.

Other fees/charges 

Consequently, it’s not just the property price that needs to be considered while purchasing a property. The cost of living has been drastically high, and affordability has reached its peak. Due to high inflation RBA is forced to increase the interest rates, which is being followed by all other banks. As of today, the lowest 2 years fixed interest rate is 5.19% (up from 4.16% p.a. last month) and the lowest variable rate being 4.01% p.a.(up from 3.22% p.a. last month)

Apart from interest rates, there are Annual Government fee charges that need to be covered. These fees relate to lodgement, registration, mortgage, caveats and stamping of security documents relating to property transactions. These fees are changed every year by the Land Titles Office (LTO) for each state and territory.

Government Schemes

But, it’s not all on the pessimistic side. Government has introduced many schemes and benefits for the first home buyer as well as property investment. 

No LMI scheme

Under the Home Guarantee Scheme (HGS), the Australian government guaranteed the eligible homebuyers to purchase a home sooner with a very low minimum deposit, and most importantly with no Lenders Mortgage Insurance (LMI) which allows you to save thousands of dollars. For this, there must be a minimum deposit of 5% and the borrower must be a first home buyer.

Stamp duty exemption

Under First home buyer Assistance Scheme, the first home buyers are entitled to a concessional rate of transfer duty or even an exemption from paying it altogether. It applies to buying an existing home, buying a new home as well as buying a vacant land on which you intend to build a home. 

Affordability

Along with all the schemes and benefits, housing prices and interest rates, a borrower must be well informed about the affordability challenges for those who are renting, and those looking to purchase their first home. Housing affordability in Australia has broadly declined due to which borrowers must be aware of the budget they can afford and the minimum deposit they need to claim various benefits. 

Depending on the suburb/city they wish to purchase, borrowers need to plan for deposits they need, the monthly repayments, upfront costs, LMIs and other fees and charges appropriately. 

It is better to seek help from the professionals for planning your finances, and choosing the property accordingly. Contact Biz-box, to book your appointment. We are always happy to walk through this journey with you. 

Celebrate your home buying with us.