As in many other areas of the world, the housing market in Australia recently has been subject to close scrutiny. Multiple factors have contributed to Australia’s high property prices namely decades of the flowing credit with home loans requiring only 5% down (or less). Other factors include the strong economic conditions, homeowners desiring bigger residences, urban concentration, the influx of immigrants from Northern Europe, and perhaps shortages in available housing. According to the National Housing Supply Council, the gap between demand and supply could reach 640,000 dwellings in twenty years if things continue, as is.
Timing the property market
In November 2011, the Reserve Bank of Australia cut mortgage lending rates, which led to an small increase in the home loans taken out (close to 47,000) and an increase in home sales through December. First home buyers were the group causing most of the growth. There has been fluctuations in local property markets with some bargains to be had and there’s confidence that the market isn’t about to experience large scale correction (i.e. drop prices). So a lot of people in the market think its a good time to buy.
Still, analysts say, the housing market is far from out of the woods yet. The government is likely to continue offering incentives for homeownership in order to stabilise the still shaky market. According to ‘Australia and New Zealand Magazine’, the housing market in 2012 is likely to continue to be “soft” but will most likely be more stable than they were in 2011. That means that for many, buying a home in Australia this year could be an achievable dream. Whether you’re seeking to buy an investment property or you’re potentially migrating to Australia and wondering if this is the time to buy or rent, here a few evergreen tips:
#1 Have a good deposit ready
Unless you’ve got a sizeable deposit of 20% ready then you shouldn’t get into the market (in my humble opinion). Having a 20% down payment is one of the best ways to protect yourself in an unstable housing market. It’ll mean you avoid the lenders mortgage insurance premiums and will reduce your monthly repayments thereby making it easier to pay off the interest and principal faster.
#2 Watch the market
Although the market is supposed to be stable this year, price changes will vary from one place to the next. In November, for instance, housing prices were up in Melbourne, Perth, and Canberra but down in Brisbane, Adelaide, and Darwin. Wealth creation with property investment is never easy when the market is unpredictable like this. Get to know a trustworthy real estate agent in your area who can help you navigate the potentially rocky waters of the housing market where you’re looking to buy.
#3 Get your credit in check
The primary means of determining creditworthiness for a home loan will be your credit score. Go to a site like Credit Reporter for your free personal credit report. If there are problems with your credit file, fix them yourself as soon as possible.
#4 Optimise your credit card use
While you’re saving up your down payment, you may need to reduce your credit limit and/or use low interest credit cards to help cover expenses so that you can save just a little more. When used responsible, Stephanie Phillips from the US-based website, CreditDonkey, says switching to a low interest credit card can be a good way to get on top of your credit card debt.
While the Australian market might be hard to predict, 2012 might be a good year for you to buy a home, especially if prices fall and government incentives continue.
David is a 20-something based in New South Wales, Australia and is co-founder of