Final opportunity to buy before prices increase,
Is the chance for aspiring buyers about to end?
Real estate expert Andrew Winter from Compare the Market cautions that trying to “time” the property market can lead to losses.
Furthermore, some buyers are wondering if Australia’s property market can become even more competitive.
If buyers believe that a rate cut is possible next year, we may soon discover the answer.
The idea alone is creating excitement among buyers eager to take advantage of the next wave of equity growth.
In July, nearly 10,000 first-home buyers successfully purchased a property, representing a 12.8 percent increase compared to the previous year.
Moreover, these buyers are taking out larger loans, with the total value of commitments rising since July 2023.
However, being a first-time buyer is not easy, as many face significant challenges in the current market.
A recent survey by Compare the Market revealed that 62 percent of aspiring homeowners lack a sufficient deposit for their dreams.
Additionally, 39 percent of respondents reported that their savings were not keeping up with rising property prices.
Now, many buyers think their chance is running out, especially if rates drop as some predict early next year.
Lower rates mean “cheaper money,” which makes borrowing more affordable. This could attract even more buyers to the market.
As a result, this situation might push prices up even higher.
So, is this really the final opportunity for buyers to enter before prices soar?
The future of the cash rate remains unclear at this time.
During the September board meeting, RBA Governor Michele Bullock dismissed speculation about a rate cut happening this year.
However, many economists from institutions like ANZ and Westpac still believe a rate cut could occur as early as February 2025.
According to the Financial Review’s quarterly survey, the median forecast predicts the cash rate will drop to 4.1 percent in 2025.
This is down from 4.35 percent today and is expected to reach 3.35 percent when policy is sufficiently loose.
Although the Reserve Bank of Australia (RBA) may be tempted to lower interest rates, they must proceed with caution.
Australia has a history of property booms that follow interest rate cuts, which can benefit property investors significantly.
However, this trend may close off opportunities for young Australians who are struggling to enter the property market.
Currently, the property market is already extremely competitive.
It’s not just first-time buyers vying for their chance; many others are also eager to join.
In May alone, new home loan commitments for property investors increased by 2.7 percent, reaching an impressive $11 billion.
This is the highest figure recorded since March 2022, indicating strong demand.
Moreover, investor loans, excluding refinancing, grew nearly 18 percent during the 2023-24 financial year, totaling $117.9 billion.
Is now a good time to buy?
Purchasing a property now could help you build equity if prices increase, improving your Loan-to-Value Ratio (LVR).
This improvement may also allow you to secure a lower interest rate in a few years.
However, do not expect the bank to automatically lower your rate just because your LVR has improved.
You will likely need to negotiate that discount on your own.
It’s important to stay vigilant and consistently compare your interest rate against the market.
This way, you can ensure that your rate remains competitive over time.
While it’s impossible to predict short-term property price movements, it is clear that we face some challenges.
A rate cut, if it occurs, combined with Australia’s ongoing housing shortage, could significantly accelerate price growth.
This situation threatens to close the opportunity window for many potential buyers in the market.
I usually advise against trying to time the market, but there are exceptions.
If you have managed to save a deposit and feel confident about meeting repayments, consider your options carefully.
Furthermore, if you’ve found a property that meets your needs and fits your budget, it may be time to act.
