Should I buy a house in 2022, or wait?

Recently, we’ve seen the Sydney and Melbourne markets lead a downward trend in house prices. Add this to continually rising interest rates and we have Australians on all sides of the property market nervous about their next move.

Despite the headlines, it’s important to stay close to local market numbers and facts before getting caught up in the media hype.

Avi Khan, Principal of Ray White Marsden, Ray White AKG and Ray White Daisy Hill, explains, “Interest rate increases are unlikely to be over and there is very little chance that we will head back to record-breaking house price growth any time soon.”

“However, the chances of a sustained downturn and giant declines in prices look to be steadily dissipating. Inflation drivers are improving and the markets are feeling more confident about the outlook.”

In fact, many say that house prices simply can’t go down much further. Rental markets remain low around a 1% vacancy rate, popular areas remain tightly held and delays on new builds continue due to rising materials costs. These factors combined mean demand simply isn’t decreasing, which may keep property markets somewhat buoyant. 

After witnessing an incredible two-year period of growth during COVID, those that are fairly new to the market may not be sure what a ‘smart’ move looks like right now.

We asked experts around Australia:

• What their best advice is for first home buyers right now
• What they would say to property investors looking to come out with a win from this market 
• Whether they recommend getting in now or waiting out the drop as a buyer

Advice for home buyers right now

Do your homework

Stu Costello, CEO Harcourts SA, suggests “My best advice is to do your homework regarding sold prices and how frequently the type of property you’re looking for becomes available in your area. Keep a focus on the most recent sales data (within the last 30 days) and compare that to sale prices over the last 12 months.”

Pay attention to the micro markets

David Webb, Homely Head of Industry, explains, “Predicting what a property market will do is always hard, so it’s important to look hyper-local when doing your research as sometimes different sides of the road can dictate buyer competition.”

He adds, “It’s not uncommon for two or three kilometres to take you into a totally different market, so paying attention to current activity in the particular spots you want to buy in is more important than ever.”

Get your head in the game, then get ahead of it.

Pete Wargent, Co-Founder of BuyersBuyers and Property Economist advises, “Work out what support and grants you qualify for and be aware of the forthcoming legal changes. Expect mortgage rates to rise for the remainder of this year, and possibly through until mid-2023, and budget accordingly.”

He continues, “NSW is set to scrap stamp duty for properties under $1.7mil in January 2023. This lowers the deposit hurdle for first home buyers, but you’ll need to be prepared as everyone will be after the same thing.”

Top tips for property investors in the current market

Think long-term cycles

Pete advises, “With stamp duty changes easing new buyers into the lower end of the market, counter-cyclical investors should know that now is the time to buy up those lower-priced units and townhouses in tightly-held areas where demand will always be high.”

Talking specifics, Pete adds, “Currently, we are seeing popularity in Adelaide’s coastal suburbs south of the city thanks to the combination of lifestyle and affordability. South East Queensland continues to attract a large share of investor interest in tandem with record high net interstate migration to the Sunshine State.”

Think about property type as much as location

Stu says, “Investing is a long-term game, so even if we are entering a slight decline, things will increase again at some point. My best advice is to buy something that could also be used for you or your family at a later stage in life.”

He explains, “Rather than an investment property in the suburbs, could you spend a similar amount and achieve a similar yield in a regional or coastal area which could then later become a holiday home for your family? Similarly, you might opt for an apartment to rent out which could become a great property to retire in later in life.” 

Interest rates, while rising, are still relatively low

Sonya Treloar, Director of Ray White Bridgeman Downs and Albany Creek, says, “Although rates have risen a little, you can still secure your money quite cheaply. With housing affordability becoming more difficult for many, renting is a popular option. A tight rental market, rising rents and medium to long-term capital growth are a good recipe for investors.”  

Think outside the box and beat the trend

Damian Collins, President of REIWA, advises, “When doing your research, it is valuable to think outside the box. Chances are, if you are reading about a ‘boom suburb’ then it is probably too late to buy in that area. Investors need to use their knowledge to try and predict areas of long-term growth, which is where the advice of a professional buyer’s agent could prove invaluable.”

With the markets down – should you buy now, or wait to see what happens?

Transacting in the same market (acting now) is great for upgraders

Damian explains, “If you are selling to upgrade then generally it’s wiser to buy and sell in the same market rather than trying to sell at the top and buy again at the bottom. Most people get the timing wrong and end up losing money.”

It’s a buyers’ market – don’t overthink it, go for it now

Pete says, “Recent history suggests that prices rarely fall too far in nominal terms before pent-up demand sees circling buyers returning from the sidelines.”  

He continues, “The current market in Sydney already represents genuine buyer’s market conditions. From a buyer’s perspective, if you’re trying to fine-tune your entry point you’ll need to keep a close eye on year-ahead inflation expectations, bond yields, and futures market pricing for interest rates…but you’ll necessarily miss the bottom by doing so.”

“The only way to negotiate deep discounts, in our experience, is to buy when vendors are at their most fearful or pessimistic. After last year’s market frenzy you can now buy with relatively little competition and frequently at prices 10 to 15 percent lower than their 2021 high watermarks,” Pete concludes.