How to get into the Perth property market
Choosing between a house or an apartment and city or suburb living can be challenging for first homebuyers.
Choosing between a house or an apartment and city or suburb living can be challenging for first home buyers.
But there are more factors that come into play when breaking into the Perth property market. Although the recent downturn has made it tough for property owners, predications forecast positive changes, with housing affordability being the best it’s been in a long time.
Whether you’re looking for a first home, investment property or a change of scenery, here’s everything you need to know about how to get into the Perth property market.
Buy at the bottom
As Perth makes its way back, there are opportunities to buy at the bottom of the market which offer an easier entry option into the market than other locations, such as Sydney. This is particularly ideal for investors or first home buyers willing to make the move.
If you’re after inner-city living, buying at the bottom can also make higher-priced locations more attainable. Typically, choosing an apartment or flat over a house is a smarter idea for this option, especially if you have a smaller budget. But, you’ll need to weigh up whether location or property is more important.
Understand the property market cycle
Although it’s not mandatory to know the Property Market Cycle (PMC) when purchasing a home, understanding it is useful in determining the best times to buy.
There are four stages in each cycle. As prices rise, fall, stabilise and eventually rise again, they represent the value/opportunity, growth, peak and correct stages. In Australia, a property cycle can last 7-10
years. The stages are:
Recovery: During the value/opportunity stage, more people are eager to buy as the market is at its lowest point. Rental prices stabalise, construction increases. But, securing financing in the recovery stage can be tough.
Expansion: New construction is at its peak offering growth, high rental demand, high prices, investors see potential in new areas and competition rises as demand outweighs supply (also part of the hyper-supply stage).
Hyper-supply: Prices begin to drop, rental prices slow down and there are small occupancy rates. If you’re an investor, opportunities here can include low-risk properties, stable tenants and long term leases in place.
Recession: Supply becomes greater than demand, rent prices drop below the rate of inflation and rent deductions are usually offered in an effort for property owners to keep tenants. New construction must stop or demand needs to increase to restart the cycle again.
Buyer behaviour, unemployment, population growth and exchange rates are all factors affecting the PMC.
Sort your finances
Without a solid budget in place and your finances sorted, committing to the Perth property market isn’t a wise idea.
Before you start researching property options, finances need a thorough health check. Try to arrange pre-approved finance, as this will encourage vendors to more likely accept your offer. Consider the following:
Home deposit size: 20% of the property price is the recommended deposit. However, you must also keep in mind other purchase costs such as building and pest inspections, stamp duty and conveyancing fees.
Budget: A realistic budget sets you up for smarter purchasing decisions. It’ll also determine how much you can borrow and the best home loan for your needs.
Type of home loan: Consider the loan features you may need, such as fixed repayments or redraw facilities. You may also be eligible for loan grants, such as the First Home Owners Grant set at $10,000.
Focus on lifestyle locations with high capital growth
Cheaply priced properties aren’t always the best.
It’s important to look beyond price and consider other crucial factors, such as location, nearby amenities or infrastructure and ongoing property costs. Lifestyle locations that deliver high rates of capital growth over the long term, like homes close to the city, river or ocean are more attractive purchases for buyers. To break into the property market, it can be better to purchase a small property in an area that
traditionally delivers high rates of capital growth. First-home buyers can sometimes make the mistake of buying in a location because they’re familiar with it. But, researching other areas beyond familiar territory can reward with affordable and attractive options.
Review what similar properties have sold for
Knowing the value of a property, rather than its quoted price can save buyers a lot of money.
According to these top first home buyer’s mistakes, researching what similar properties have sold for (not been listed for) before buying offers a better understanding of what your home is worth and why. This information when negotiating or looking to purchase the home you want is invaluable.
Ask the right questions
Throughout your research stages, speak to as many people involved with the property market as possible.
The selling agent can help determine if the owner is a willing or ready seller. Property owners that are selling out of urgency tend to give into negotiating power. However, willing sellers have no compulsion to sell if they don’t get the right price.