Housing prices aren’t the only factor in whether you should buy
Those in search of a silver lining to the recession that has accompanied COVID-19 lockdowns might look to falling housing prices and decide now is the time to buy. So, is it? Unfortunately, there’s not a one-size-fits-all answer. These are ways to determine if it’s right for you.
Where are you?
CoreLogic’s monthly housing prices data showed an average drop of 0.4% across Australia for May, but the distribution was hardly uniform across state and territorial capitals. Darwin saw the biggest drop at 1.6%. In larger urban areas, Melbourne home prices fell 0.9%, Perth came in at 0.6%, and Sydney right on the national average at 0.4%. But prices in other capitals rose in May. Hobart saw home prices gain 0.8%, Canberra half a per cent, and Adelaide 0.4%.
Do you have a steady income?
Even as housing prices might fall as much as 10% in some areas over the coming months, that doesn’t mean much for prospective buyers who have lost their jobs. If you’re relying on JobKeeper payments that could expire in September, there might be too many unknowns about the scheme to risk defaulting on a mortgage. If you work in an essential industry and are reasonably certain of an assured job status, you’re in a better position to take advantage of lower prices.
Can you get a loan?
Banks have become more stringent about home loan prerequisites, especially for self-employed entrepreneurs. People in industries not likely to recover quickly, such as travel-related jobs, have more hurdles to clear to get credit. If you’re having a tough time getting approval from one of the Big Four banks, you might look to a micro bank such as 86 400, which offers home loans and promises a quick response on approval.
Did your rent drop?
Rental properties have seen their lowest prices since 2013 in the wake of the downturn. If you’re renting a house or an apartment in a CBD and your rent has gone down, is it worth the effort to buy a home right now? Might you be better off pocketing the savings and building up a nest egg? The lack of foreign investors scooping up rental properties has sent these housing prices down, and they likely won’t rebound until border restrictions are gone.
Can you take the down payment from your super?
Eligible Australians can withdraw up to $20,000 from their superannuation funds. That money is, of course, for retirement investing and likely to mature into more than its current value. That understandably might stop people from using the scheme. However, as far as investments go, purchasing a home is more often than not a sound one. The value of your housing is likely to increase, especially if you time the purchase right.
Can you use a stimulus program?
This might be the biggest factor. Especially now that’s there an extra $60 billion that had been earmarked for JobKeeper, the government is looking at targeted stimulus money for the housing industry. Whilst there will be grants for construction projects and home renovations to keep tradespeople afloat, the Property Council of Australia has proposed giving $50,000 to buyers of newly constructed dwellings to ensure there’s demand for those new homes.