Have property buyers missed the boat or should they take the plunge?

Property buyers around Australia have seen prices rise rapidly, with many now wondering whether they've left their run too late or if now is the time to jump in.

Tourist watches ferry depart from harbour.
Timing the market exactly is almost mission impossible, but knowing whether to board or disembark is essential. (Image source: Shutterstock.com)

If you have been searching for a home or an investment property throughout 2023, you would have seen first-hand the resilience of Australian property markets.

Despite all the interest rate increases from the Reserve Bank of Australia (RBA), which has resulted with official rates rising 4 per cent over the last year, property prices have not only stopped declining but are now on the rise, and have been for quite a few months.

This has left many property buyers questioning whether they have missed the boat and will now need to adjust their expectations on what they can afford for their budgets.

This is particularly the case for those buyers who have been trying to time the bottom of the market.

Across the country, the national change in dwelling values for the October 2023 quarter was 2.3 per cent compared to the annual change in dwelling values of 3.9 per cent. The median value in Sydney now sits at $1.11 million from a 7.3 per cent annual rise in dwelling values. The median dwelling value in Melbourne now sits at $776,000, while in Brisbane the median dwelling value is $761,000.

There is a lot to dissect about this phase of the current property cycle, as well as how you can approach buying a property in this market.

What does ‘recovery phase’ mean?

The ‘recovery phase’ can be also referred to as the ‘upturn period’ where we see property prices starting to rise.

It will follow shortly after property markets have reached their lowest point. The main characteristics of this phase are:

  • Buyers’ confidence increases so more buyers enter the market, increasing demand for properties.
  • Interest rates begin to stabilise, allowing some certainty and confidence in the borrowing markets.
  • Property prices start to increase after a period of decline.
  • Auction clearance rates increase.
  • More properties are for sale at auction.
  • Days on market starts to decline (the number of days it takes for a property to sell).

Why are property prices rising?

The reason we are seeing property prices rising is due to the simple economics of demand/supply.

We are seeing lower listing volumes, meaning there are less properties available for sale and that is not meeting the demand for properties. This low supply is also cushioning any further drops in property prices due to interest rate increases.
There has been a post pandemic surge in migration as well as the return of international students who all need to find a place to live.

The rental crisis is also adding fuel to the fire, with many tenants opting to enter into the market to buy a home as it can be cheaper to pay a mortgage than continue paying skyrocketing rents in a stretched rental market.

Not until we see more building approvals, new properties being developed and a slowdown in migration will we expect to see housing supply start to meet the demand for housing.

Is it possible to time the market?

Unless you have a crystal ball, it is not possible to time the market exactly.

A lot of buyers who try to do this often end up missing the boat because they wait too long to try to buy a property at the bottom of the market when prices are at their lowest and (ironically) the only way you can determine when the market has reached the bottom is when it is too late and you start to see property prices increasing.

When property markets enter the recovery phase and prices start rising, many of those buyers who are price sensitive that were waiting to time the bottom miss out altogether and can no longer afford to buy in the rising market.

The best time to buy a property is always when you can afford to, and to keep in mind that property is a long-term investment and crunching the numbers and waiting to save a few thousand now might result in missing out altogether.

How to buy property during the ‘recovery phase’?

During the ‘recovery phase’ of the market, we are seeing property prices recovering and starting to increase on an upward trajectory.

A really popular strategy for investors during the recovery phase of the market, is to renovate an investment property.

This means they will purchase the property when property prices start to increase, then they will do a renovation on the property during the rising market that will add additional value to the property.

Then they will sell when the property enters into the next phase, the expansion phase. During the expansion phase, this is the most popular time to sell an investment property as it is likely the soonest period to realise the largest profit on the property.

Of course, property should be a long-term investment but if you were wanting to sell an investment property to move on to your next project then the expansion phase would be the time to do it.

What do I do if you have missed out?

If you believe you have missed the market and are unsure whether you can afford to buy property it is best to speak to your mortgage broker and have your borrowing capacity assessed.

You might need to make some sacrifices in a rising market, meaning you might need to look elsewhere or change your investment strategy to meet your new needs.

Article Q&A

Is now the time to invest in property?

The best time to buy a property is always when you can afford to, and to keep in mind that property is a long-term investment and crunching the numbers and waiting to save a few thousand now might result in missing out altogether.

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