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Should I buy property now or wait for interest rates to fall? - featured image

Should I buy property now or wait for interest rates to fall?

key takeaways

Key takeaways

While there's a temptation to wait for the perfect moment to buy property, attempting to time the market perfectly is difficult and often not the best strategy.

Instead of trying to pinpoint the lowest prices or waiting for a downturn, concentrate on being in the market consistently. Property markets work in cycles, and long-term ownership tends to outperform attempts at market timing.

Prioritise properties in good locations, as they tend to perform better in the long run. Don't wait indefinitely for the "perfect" time to buy; rather, focus on finding the right property when your finances are prepared.

It’s literally the million-dollar question: Do you buy a property now before prices rise even further, or wait until the interest rates fall later this year to free up some more borrowing power?

Australia's housing upswing continued through the first month of 2024 with the national Home Value Index rising 0.4% in January.

CoreLogic’s data also shows that the median dwelling price for Australia now sits at  $765,762 while the median dwelling price for our combined capital cities now sits at  $842,109 and regional towns sit at $612,096.

Median property price changes around Australia:

City Month Quarter Annual Total return Median value
Sydney 0.5% 0.6% 10.6% 13.8% $1,128,155
Melbourne 0.1% -0.6% 4.0% 7.5% $778,941
Brisbane 0.9% 2.9% 15.6% 20.3% $805,593
Adelaide 1.1% 3.6% 11.8% 16.4% $727,142
Perth 1.8% 5.2% 18.3% 23.9% $687,004
Hobart -0.3% -1.4% 0.6% 3.6% $652,645
Darwin 0.1% 1.6% -0.1% 6.1% $499,834
Canberra 0.7% 0.3% 1.6% 5.7% $840,103
Combined capitals 0.6% 1.2% 10.0% 13.9% $842,109
Combined regional 0.6% 1.3% 5.5% 10.1% $612,096
National 0.6% 1.3% 8.9% 13.0% $765,762

Source: CoreLogic, March 2024

But prices vary wildly depending on what state you live in.

Sydneysiders face a huge $1.12 million median if they want to live in the harbour city while Melbournians and Brisbanites face a smaller but still pricey $777,250 and $796,818 median for properties respectively.

Meanwhile, many experts believe that our interest rates might finally be peaking as inflation comes under control, with most suggesting interest rate cuts will come towards the end of the year.

And when it comes to property investment, many buyers and investors become obsessed with the idea of timing their property purchase believing that buying for the cheapest price is a formula for property success.

It’s no wonder then that so many active buyers in the market are questioning whether or not to buy now or to wait.

Keep calm and carry on

While it's tempting to try to time the market to maximise your profits, this strategy is often a poor choice for property investors.

Instead, focusing on "time in the market" is a much more effective approach because, as we know, the market works in cycles.

The issue is that no one really knows, not even the experts, how long each cycle will last because it depends on a huge number of variables including economic conditions as well as human behaviour – and we all know how hard that is to predict.

Instead of timing the market, sophisticated property investors understand that they need to focus their efforts on buying an investment-grade property, in an A-grade location at the time which suits them.

The important part of that statement is that they always buy “investment grade” properties in good locations because these are the types of properties that will outperform in the long run.

Smart investors don’t wait around for the lowest prices or a downturn, they buy when they have their finance ready.

It can be tempting, especially in a downturn like we’re currently experiencing, to hang on and wait for prices to lower further with the idea that you’ll get more ‘bang for your buck’.

But the reality is, investment-grade properties in good locations are more stable than in other markets and the point of the cycle is less important if you’re committed to holding the property long-term.

This means that it doesn’t really matter that much when you enter the market if the value of your property will double in value over a 10-year period as it has over the last 40 years.

What’s important is that you hold the property for long enough to see compound growth.

This strategy would also help you to ride out any temporary market fluctuations.

That way, if it comes time to sell down some of your assets when you reach retirement, or whenever is the right time for you, you will have created wealth from your portfolio's compounding equity over the decades.

The risk is that by waiting for the ‘perfect time’, property investors risk missing out on time in the market which translates into money earned, or they could even miss out on investment grade opportunities altogether.

Domain Chief of Research & Economics Dr Nicola Powell agrees and advises that potential buyers keep calm and carry on.

I really believe, having pored over 30 years of housing market data, that housing markets are cyclical, and you go through lots of periods where prices rise and then fall - she says.

When you’re purchasing a property, it’s for a long-term investment and you are going to ride multiple property cycles, and that’s how you build financial wealth. So if I would give any advice, it would be to buy when it’s right for you. Housing markets are complex and often impossible to predict.

Ray White Group chief economist Nerida Conisbee echos the same concept, saying that many people have missed out on buying homes after waiting for a price crash which never came.

Instead, prices moved in the opposite direction and left many of them high and dry, and now unable to buy the properties they could have back then.

The best time to buy is always when you are personally and financially ready - she says.

We generally don’t advise people to wait for interest rates because it’s so easy then to become unstuck when they don’t change for a while, and you’re left in a fairly negative position.

It’s better to buy when you’re ready to. And if you buy now, you’ll still benefit later when interest rates do come down, as well as from any price rises in the meantime.

While most commentators believe that interest rates will be cut later this year, improved affordability that follows will encourage more buyers into the market and quickly push prices higher.

That means there’ll be more competition for properties and prices may well go up further as a result.

So if you have the financial capacity to buy now, and you’ve seen a property you like and can afford, then I’d suggest you do that sooner rather than later.

We’re probably seeing another six to eight months where rates will be on hold, with the first-rate cut early in the second half of this year.

Buying Property

In the meantime, shop around

In the meantime, get your duck in a row and take advantage of the window of opportunity before prices rise.

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Note: Currently, there is a shortage of good homes and investment-grade properties for sale, so if you find a home you love and it ticks all your boxes in a suburb you want to live in and within the right price range that you can service comfortably I suggest you don’t hesitate to snap it up.

Taking away consumer sentiment, Australia's housing and economic fundamentals are very sound.

Many households are cashed up, equity growth has been phenomenal for most homeowners and property investors, the job market is strong and Australia's mortgage delinquencies are very low.

What this means is that the current poor consumer sentiment when most other economic fundamentals are strong is a bit like a cloud covering the sun.

Spring will follow Winter, and Summer will follow Spring - this too shall pass by and the long-term upward trend of the value of well located properties will continue.

So my recommendation is that if you're in a financially sound position, you should not try and time the market, but rather buy while others are sitting on the sidelines.

If you think about it...

  • There is less competition at present.
  • You have more time to conduct your research and due diligence.
  • It's a buyer's market so you'll have the upper hand in negotiations.

But don't look for a bargain - A-grade homes and investment-grade properties are in short supply and still selling for reasonably good prices.

These high-quality properties tend to hold their value far better than B and C-grade properties located in inferior positions and inferior suburbs.

And remember, there are multiple property markets around Australia, and at the moment while many markets are experiencing falling prices, some are still growing, while others are poised for growth over the next year.

There’s a saying in property circles that goes:

When was the best time to buy property? 20 years ago! When is the second-best time – today!

In other words, you buy when you can afford to and when you are ready to.

About Leanne is a highly experienced Buyers Agent in the Brisbane Real Estate market. Leanne became a passionate lover of property in 2001. Since then, both professionally and personally, she has been involved in all aspects of property including purchasing, negotiating, renovating, and selling.
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