Weighing your options amid a challenging time.
Owning a home is a huge personal achievement and a momentous milestone. Buying a house needs preparation and research because it is likely to be the most expensive purchase a person will make in their life.
Buying a house is more than looking for ‘Home, sweet Home’; there are many things to take care of, such as the deposit (20% is common these days, compared to 5% or even 0% 15 years ago), legal fees, stamp duty, and building inspections. Despite this, owning a house brings a sense of security that renting cannot.
The Housing Landscape Has Changed
As the pandemic shook the economic landscape of the world, many Australians realised the opportunity to buy a home. In fact, while many financial experts predicted a downturn in the Australian home market, there was an increase in home loan applications – more than 10,000 home loans were approved for first time home buyers in July 2020 alone.
Many people may initially feel apprehensive about buying a home in this volatile period, as the pandemic is still affecting the global economy: Many households and small businesses are still feeling some fallout and the country still hasn’t fully recovered, with hundreds of thousands still out of a job. People wouldn’t want to spend more than what they actually earn. Still, this doesn’t stop the Australian housing market from soaring and, in truth, Australia is beginning to crawl out of recession.
Is Now the Right Time to Buy a Home?
If you doubt whether you should get a home now or defer later, you came to the right place. Buying your own house may be a personal pursuit, but researching before you take the plunge can help you make an informed decision.
The Pros of Buying a House Now
If you are still undecided whether to invest in a house you can proudly call your own, here are some reasons why many Australians are buying homes despite the Corona Virus pandemic:
- Low mortgage rates
Interest rates are almost zero at 0.1%, which has led to mortgage rates coming down as low as 1.67% in April 2021. In an effort to keep economic activities afloat, the Reserve Bank of Australia has implemented its emergency monetary policy to help the economy recover.
The RBA’s quantitative easing simply means that it will be printing money to supply funds to the country’s financial system. It does this by buying government bonds and other financial assets. Providing liquidity to financial institutions has made borrowing money more affordable to households and small businesses. All this means that there is a theoretically higher chance of scoring a good deal when applying for an owner-occupied home loan.
- Equity Growth
As a mortgage is paid off, and as the value of a property increases, the amount of money that the house can bring at sale grows larger than the amount of money that is owed on it. The difference in value is called Equity and this equity can be used for other major financial needs, such as a new car, your children’s education, or an investment.
The earlier you own your place, the more time you can have to work to your advantage as your property’s equity builds over time.
- Sense of Security
It is vital to have a strong sense of security which grows a sense of safety and freedom. With a virus that is spread through contact, owning a home can help protect from interpersonal connections in the short term.
Owning a home also protects from sudden eviction due to a landlord’s house sale, as long as the mortgage is paid of course.
Cons of Buying a House Now
Of course, a coin has two sides and it would be unwise to make such an expensive purchase blindly amidst the pandemic or at any other time.
- Unpredicted Higher Prices
If there is one thing that experts were not able to predict when the COVID-19 pandemic rolled in, it’s that property prices would soar. Properties are now more expensive than they were before the pandemic.
Regional housing markets are also on the rise – owning a cheaper home is no longer a real option. Regional house prices increased by 7.9% in February 2021 alone. With many people enjoying the perks of working from home, many are also seeking to be close to nature. More and more families are moving to regions near the sea or near more trees.
For instance, in Sydney, the median value of property prices increased by 2% for this year to $871,749. For Perth, the median value increased by 3.4% to $471,310. Canberra’s property prices increased by 8.5%, with a median value of $678,765.
- Demand is Outstripping Supply
While the volume of home buyers is increasing, house listings cannot keep up and remain low. For instance, Sydney’s supply of homes for sale is below the five-year average by more than 25%. The same is true in Melbourne. Home sales increased by 38% compared to last year, while the home listing is only up by 2%.
This means that potential buyers may end up saying yes to a property out of fear of running out of options and they may end up settling with a house that falls short of expectations.
- Market Volatility
Yes, Australia is coming out of recession, many businesses still feel the brunt of the pandemic and unemployment is high; Now more than ever, the future is not set in stone and the best way to protect a financial future is to win a mortgage that is repayable now and in the future whilst also allowing spare funds for financial emergencies.
Looking for a House? Call Arnold Property for a Real Estate Consultation.
Arnold Property is made up of experienced and professional real estate agents who can help you buy or sell your home. We have been in business in Newcastle for more than 25 years, helping Local home buyers find the home of their dreams or find them a seller for their price.
We help you with all your real estate needs, and we help you find a home that you can comfortably afford. To find out more, visit us at arnoldproperty.com.au or call us now on (02) 4969 2600 for an appointment.