One of the biggest questions property buyers always ask is should I buy now or should I wait? When interest rates are uncertain, property prices have been moving and there is constant media hype around the current market, it can be tempting to try and wait for the “perfect” time to buy.
Sydney’s and Melbourne’s auction clearance rates have continued to climb in the last few weeks according to the Australian Financial Review. This is a sign that buyer activity has been increasing.
With clearance rates climbing and competition increasing we’re seeing more buyers turn to a dedicated auction bidding service to understand value and avoid overpaying
But the reality is that there’s no perfect time for everyone. Our advice as Sydney buyers agents is to buy when you can and sell when you have to. The better question to be asking yourself is this: Does buying now make sense for my financial circumstances and serviceability?
There can be a lot of media hype that further confuses buyers as to when they shouldn’t buy. Everyone wants to buy in a hot market but once the media reports a softening market with reduced prices, buyers fear it may not be the “right” time.
Here are some of the key factors to consider before deciding whether to buy now or wait.
1. Property markets aren’t linear.
Property markets move through various cycles, but trying to perfectly time the bottom of the market is extremely difficult. Prices can move higher even when interest rates are elevated. They can also remain flat for extended periods before moving again. If there are low levels of stock on the market and vendors hold off from selling, this too can create higher property prices, even in a slower market.
This means waiting for a significant price fall can be risky.
Many buyers say they will purchase when prices fall, but when the market eventually does decline, uncertainty and negative sentiment makes them even more reluctant to purchase.
2. Circumstances matter more than market timing
The property market is only one part of the equation. Other factors such as income, borrowing capacity, deposits and savings, lifestyle and strategy should be considered.
If you’re in a strong financial position, with a healthy deposit and have found the right property. Why would you wait?
On the other hand, if buying would leave you financially stretched, you have unstable employment or you are relying on interest rates falling quickly, waiting may be sensible.
The right decision is different for every buyer.
3. What happens if prices rise while you wait?
Choosing to wait can cost you the right property.
Let’s say you are looking at a property worth $1 million today but decide to wait because you believe the market will fall. If prices instead increase by 5 per cent, that same property could be worth approximately $1.05 million.
You haven’t necessarily become financially better off by choosing to wait. If anything, you may now need a larger deposit to borrow more money and potentially pay more for stamp duty and other purchasing costs.
This doesn’t mean prices will rise. It simply highlights why waiting is not a risk-free strategy.
4. Interest rates are only one part of the equation
Many buyers focus heavily on media hype and interest rates when deciding whether to purchase or not.
While borrowing costs are important, property prices and interest rates don’t always move in the way buyers expect. Some buyers wait for interest rates to fall, only to find that increased borrowing capacity and stronger buyer demand put upward pressure on property prices. As the interest rates change so too can finance, meaning your borrowing capacity may drop. This means by waiting you may now not be able to buy the property you wanted.
Rather than trying to predict exactly where interest rates will be in six or twelve months, buyers should make sure they can comfortably afford the property under their current circumstances.
5. Supply and demand can be more important than headlines
The Australian property market gains plenty of attention, but ultimately property is a local market. One suburb can perform very differently from another.
Even within the same suburb, one type of property can outperform another. A well-located family home on good sized block may experience very different demand to a property on a busier road. This is why looking at broad headlines such as “Sydney property prices are falling” or “Sydney property prices are rising” doesn’t tell the entire story.
6. Waiting can make sense when you’re not ready
There are situations where waiting is genuinely the right decision.
You may want to wait if:
- You haven’t saved a sufficient deposit
- Your borrowing capacity is too tight
- Buying would leave you with no cash reserve
- You don’t have the right strategy in place
- Your employment situation is uncertain
- You haven’t decided where you actually want to live yet
- You are buying purely because you are afraid of missing out
- You haven’t done enough research on the market
Buying property is a major financial commitment and there is nothing wrong with waiting if you need more time to put yourself in a stronger position.
7. Buying will make sense when the right opportunity appears
There is a danger in waiting indefinitely. If you have spent months or years searching the market, there is a big risk that you are now priced out of the area you originally wanted. A property that is fundamentally strong, fairly priced and fits your long-term strategy can be worth buying regardless of whether the market is at its absolute bottom. The goal shouldn’t be to buy the cheapest property possible. If the property is “cheap” then there is something wrong with it.
8. Don’t confuse price with value
One of the biggest mistakes buyers make is focusing entirely on the purchase price. A $1 million property isn’t necessarily better value than a $1.2 million property in any market.
Factors to consider:
- Location
- Land size
- Property condition
- Layout
- Street appeal
- Future development potential
- Rental demand
- Supply of comparable properties
- Recent comparable sales
- Long term capital growth prospects
- Potential costs and risks
A property can seem cheap for a number of reasons. Paying a little more for a superior property can make more sense than buying a cheaper property with significant issues or compromises.
9. What if the market softens after you buy?
This is one of the biggest fears buyers have. Nobody wants to buy a property and then see its value fall. But if you are purchasing a home to live in for the long term, short term fluctuations are less important than they feel. Markets move up and down in cycles. The bigger concern should be whether you paid a sensible price for a property that you are comfortable holding over the long term.
This is also why due diligence and negotiation are so important. You don’t want to rely on the market rising immediately after you purchase.
10. So, should you buy now or wait?
There’s no universal answer as it really comes down to each individual’s needs. If you are financially ready, have a clear strategy and find the right property at the right price, buying now can make sense. If, however, you are financially stretched, uncertain about your plans or haven’t identified the right property, waiting may be the smarter decision.
The mistake is assuming that you need to predict exactly what the property market will do next. You don’t need to predict the real estate market. You need to make a clear decision based on the information available to you.
If you’re a home buyer, you need somewhere to live regardless of what the market is doing. If you’re an investor, and the numbers stack up with the right strategy, now could be the right time to buy. Once the market shifts, you’ll be paying a premium and facing more competition.
