I am often asked, “I’m unsure about the market, is now really a good time to buy?” or “Should I buy a property now or wait for things to pick up?”
With the currently low market sentiment in the Melbourne and Sydney property markets, it is understandable for the average home buyer or investor to ask these questions.
Mainstream media does a great job of broadcasting the bad news, predictions of market crashes, interest rate uncertainty and banks tightening. This then gets talked about at the next gathering of family and friends, spreading fear throughout the nation one barbecue at a time.
Let’s ignore the headlines for a moment and focus on the present and the elements you can control. Here are a few things to think about when buying in an ever-changing market.
Focus on what you can control
“When and where should I buy to see the best growth?”
“How much will this suburb go up by?”
“When are interest rates going to increase?”
These are questions that require a crystal ball. They are essentially asking to tell the future and can never be answered with any degree of certainty.
Instead, focus on what you can control now, by asking questions like:
“Does the property appeal to the majority of buyers?” (Owner-occupier appeal)
“Can I improve the value of the property?” (e.g. through a renovation)
“Is this the good or bad side of the suburb?”
“How much below market value is this property?”
By changing your focus, you now have more control over your situation and you are effectively protecting yourself against any negative short-term market fluctuations. So, when it comes to buying property in today’s market, be aware of the news, but remember to take control rather than speculate.
Have a financial buffer
For home buyers and property investors, the answer to the popular question, “When should I buy?” is the same, “Buy when you can comfortably afford to and when your cashflows allow.” It has nothing to do with market sentiment, interest rates or bank credit policy.
I take the philosophy that property is a long-term investment. Whether you’re buying a family home to one day pass on to your children OR leveraging off a property to build your portfolio, you need to have the cashflow to be able to hold on to your investment long term. So ask yourself, “How much this property is going to cost me to hold? Can I afford it? And do I have a buffer or safety net in case of things like interest rate raises, repairs and maintenance or tenants moving out?”
If you can afford to, if your cashflows allow, if you have a realistic financial buffer in place, and if you’re in it for the long haul, there is absolutely no reason why you shouldn’t be considering to buy now.
Look for the opportunities
With the low market sentiment and tighter lending conditions, many are sitting on the sidelines waiting to see what’s going to happen next, unsure or too afraid to act. However, for those with many years of property experience, now is a time to look for opportunities that weren’t there before.
If you have your cashflows in order and you’re set on a quality property, here lies an opportunity to pick up the dream home or a quality investment property. There are less people at open homes, less bidders at auction and less offers to compete against – reduced competition across the market. And if you take a long-term view, low market sentiment and fear dissipate as the inevitable truth is that the market will turn and again continue to perform.
“Be fearful when others are greedy and greedy when others are fearful.” – Warren Buffet
So, remember these key concepts when buying in today’s market, and ignore the headlines and naysayers. Think long term and know that you can control the outcome.
For further guidance with your next property purchase contact Your Future First on 03 9362 1458 or email andy@yourfuturefirst.com.au