For most people, buying a home is like a dream-come-true. But is it a good time to buy? This is one of the biggest perplexities for potential homebuyers considering to buy a new house in Australia. The question has become even more relevant amid the global coronavirus pandemic today.
Economic downswing, joblessness, and financial insecurity have put people in a dilemma – is time running out to buy a house or should I wait?
Key Insights Await: Decisions around homeownership require thorough research. Dive into our in-depth analysis of the question: should I buy a house now?
Understanding the impact of COVID-19 on Australia’s economy
At the face of the COVID-19 outbreak, 2/3rds of first-time homebuyers in Australia are forced to postpone or abandon their plan to buy a house. This is one of the big property trends of 2021.
The study by Gateway Bank further suggests that around half of the homebuyers have tapped into their deposit savings to pay-off their daily expenses and liabilities, while 16% of them have spent a significant amount of their savings already. Furthermore, we know that the Gross Domestic Product dropped to 6.3% year-on-year, showing a slow economic decline.
All of this might make the Australian dream of buying a property to call your own more elusive than ever.
The country is amid its first recession in nearly 30 decades as the deadly disease has caused the economy to decline at a record rate of 7% in the second quarter.
“The June quarter saw a significant contraction in household spending on services as households altered their behaviour and restrictions were put in place to contain the spread of the coronavirus.” According to Michael Smedes, the ABS head of national accounts
Furthermore, authorities estimate the national unemployment rate to be at its peak at 9.3% in December. The pandemic has literally upended lives, wreaking havoc on our health, economy, and jobs. Though the recession has come to end and the economy is recovering through the last quarter, the financial crunch continues to be the most common problem for homebuyers in Australia.
The current trend for real estate market
On the other hand, the impact of COVID-19 on house prices is still uncertain. Earlier, experts estimated a price drop of 10-20% in the coming one to two years.
In real time, there was a 2.1% drop in housing prices between April and September, and much of this was pandemic-influenced, experts suggest.
The supply of residential dwellings was more but the demand was low with uncertainty and financial crunch being the primary reasons.
However, keeping in mind how the economy is recovering, experts now predict that if coronavirus is contained in Australia, housing prices will not decline by 10% to 20% as were initially forecasted.
After witnessing a higher sales rate in October, CoreLogic had now seen a 0.8% growth in housing values in November 2020. If you haven’t found a home yet, more listings are coming, fret not.
As housing prices continue to grow, it is estimated that the housing market will potentially surpass pre-COVID levels in the first quarter of 2021.
“The national home value index is still seven-tenths of a percent below the level recorded in March, but if housing value continues to rise at the current pace, we could see a recovery from the COVID downturn as early as January or February next year.”
According to Tim Lawless, the head of research at CoreLogic.
According to an independent economist, Stephen Koukoulas, it is indeed surprising to see housing prices rising during a period of recession.
He suggests that several issues together are playing an integral role in driving up the prices. “Most states and territories started to relax their lockdown restrictions around then,” he said. “We had the RBA cut interest rates to incredibly low levels, most of which were passed on by the banks.”
He further added that “There’s also been a big pickup in first-home buyers, where they’re perhaps dipping their toe in the water and starting to look for housing opportunities with interest rates so low. These are the things that I think have fuelled a bit of demand.” The Reserve Bank of Australia has already announced that it won’t change the record-low 0.1% cash rate and it is expected to remain low for around three years now.
Navigating Uncertainty: In the realm of property, uncertainty is common. Enhance your understanding with our insights on Should I Buy a House Now or Wait for a Recession? to navigate these complex choices.
What are the factors when determining if it’s the right time to buy?
Keeping the above facts in mind, here is a quick rundown of key factors to keep in mind to determine if it is the right time to buy:
1. Understand the current impact of COVID-19 on the economy, the housing market, and your financial condition
2. Consider the rate of income stability today and in the years to come
3. Calculate your borrowing power before applying for a mortgage loan. This would depend on your current income, expenses, and financial condition in the future .
Finally, do not fall for market predictions always. You’re the main decision maker and it will be in your best interest to buy a house that you like at the right time.
If the above factors are in your favour and you’re ready to buy, then simply go for it. Research your location well and buy your dream home. It is all about determining your ability to pay a mortgage and compromising on your unnecessary expenses.
