When looking to purchase a property, people often want to know “Is Now a Good Time to Buy?”. In this current climate where interest rates have reached a 9 year high and continue to climb, the impact is being felt by both homeowners and renters alike, causing most people to shy away from the property market. In this post, we will examine 3 factors to help decide whether or not it is the right time to buy an investment property. 

1. Government Incentives

The Federal Budget for 2023-24 included changes to the Home Guarantee Scheme. Eligibility criteria was widened, allowing more homebuyers to qualify for this program. For example, starting 1st July 2023, joint applications for friends, siblings and other family members will be allowed under the First Home Guarantee program. Besides this, buyers who have previously owned a home may be eligible if they owned their home over 10 years ago. These changes mean that more people will be able to buy a home with a low deposit, which will draw more buyers into the market, increasing demand and causing property prices to rise. 

2. Supply & Demand

The housing market is currently under a lot of pressure, with vacancy rates sitting at record lows and Australians finding it increasingly difficult to secure a place to live. To make matters worse,  the government is expecting to see 715,000 migrants enter Australia in the next 2 years. All these migrants will need a place to live, which will drive up demand for housing further. On the other hand, due to Covid, inflation, and increased building costs, many major builders like Porter Davis have gone bankrupt, meaning that we are not building nearly enough properties to meet demand. This increase in housing demand paired with the lack of supply will inevitably cause property prices to increase.

3. Interest Rates

Australians have experienced 12 interest rate hikes from April 2022 to June 2023. Many prospective buyers are waiting for rates to drop before entering the market as this would increase their borrowing capacity. It is important to consider the fact when rates decrease, more people are able to enter the property market. This, and the fact that most people are waiting for interest rates to drop before entering the market, will lead to a surge in buyer demand when interest rates do stabilize and drop, which will cause property prices to rise. We have to keep in mind that while interest rates may feel high now, they will inevitably fluctuate over a 30-year loan period. Those who are able to secure a loan will be better off buying now than paying more for the same property when interest rates drop. 

Next Steps

So what should you do next? The best thing to do would be to consult with your mortgage broker and buyer’s agent, as they can help you to determine whether you are in a position to purchase an investment property. Your mortgage broker will give you an indication of your borrowing capacity, and your buyer’s agent can help you to work out a budget for purchasing an investment grade property - which may be lower than you think! If you are able to purchase now, it would be advantageous to get a head start before more buyers enter the market. As Warren Buffet once said, “Be fearful when others are greedy, and greedy when others are fearful”.