What spring has in store for the Australian property market
Spring is shaping up to be a bumper season for the property market, and with interest rates low and staying there, I caught up with Mozo’s resident property guru Steve Jovcevski to find out what the rest of 2016 has in store for prospective home buyers.
Here are his predictions...
1. The RBA will cut rates in November
Some experts are expecting interest rates to stay on hold until next year, and others are even expecting out of cycle rate increases by the banks in November like what happened last year, but Steve disagrees - “I think we’ll see another period of low inflation when the data comes out at the end of October, and so the RBA will drop rates again in November to combat it and the banks will have wiggle room to follow suit by at least some of the rate cut, as many didn’t drop by the full 25 basis points in August.”
2. The banks will pass on more than they did last rate cut
Last time there was a rate cut in August, the banks copped a lot of flak for only passing on around half of it to customers. So this time, Steve says that although he doesn’t think they’ll pass on the whole lot, “I’d expect to see them pass on maybe an 18-20 point cut.”
3. There’ll be plenty of property up for grabs
The spring property season is a popular time of year for home sellers, which means there’ll be no shortage of properties on the market for the rest of the year.
A higher number of property listings would usually mean lower prices as supply outstrips demand - but with rates so low, that’s not necessarily going to be the case this year.
“Yes there are more homes on the market, but when home loans are so affordable, there are more people out there looking for a property as well,” Steve says. “So I think the demand is still there.” Which means...
4. Property prices will stay strong
As home loan affordability cancels out the influx of new properties up for sale, Steve says we can expect “a strong spring property market - in August alone we saw a 1.5% increase in prices in the Sydney market.”
In fact, if you’re keen to buy this year, you might as well do it - according to Steve, apartments likely aren’t getting any cheaper for the next 6-12 months, and houses are likely staying expensive for the foreseeable future.
“But the flip side of that is that if you can afford to buy, you’ll probably make money in the long run, because the property market isn’t showing any signs of slowing.”
Steve’s top tips for spring buyers
- Take your time. In the spring season, there are heaps of properties around - which means you’ll want to take your time and do your research to make sure you’re getting the right one for you. Spend some time in the area - “Is it somewhere you can see yourself living?” Steve asks - and be prepared to spend a number of weekends on the search.
- Go to multiple open inspections. You’ll probably see a heap of houses on your property hunt - but make sure that if you find one you like, you see it more than once. Steve suggests going to as many open inspections for it as you can, and to “try to go at different times of day - an evening inspection can give you a totally different perspective to one in the morning.”
- Be selective with building inspections. Getting a building inspection done by a professional is an important step in buying a home - particularly for new homebuyers who may not know exactly what to look for. But inspections can set you back $500 each time, so, Steve says “be selective and only go ahead if you’re serious about putting in an offer for the property.”
- Be realistic about your budget. “You can’t always trust agents and buyer’s guides when it comes to the price of a house, especially in a market where prices are always steadily increasing,” Steve says. A property next door could have sold for $800,000 last week, but that doesn’t mean the identical house you’re looking at isn’t worth $850,000 this week. His advice? “Look at the upper price you think the property might go for and then budget for another 10% on top of that.”
- Get pre-approval. When you go to an auction, you want to already have home loan pre-approval from your bank, so you know what kind of budget you’re dealing with. In this market, Steve suggests getting as high a loan amount pre-approved as you can - “if you’ve got a $100,000 deposit and the property looks like it’s going for $900,000, still get approved for a $900,000 loan if you can. You’ll probably need it.”
- Get your bank’s opinion. The thing is, pre-approval doesn’t necessarily mean you’ll get the loan. Once you buy the house, the bank does its own inspection and if something’s wrong - say a structural fault - they can refuse to lend to you. So Steve says that if you’ve found a property you’re serious about, email the details to your banker. “They’ll have access to building info and might be able to tell you if there’s something about the building that might stop you from being approved for the loan.”
Ready to take the plunge into the spring property market? Compare home loans side by side and find the right one to make your real estate dreams come true.