Oh, to have a crystal ball! Whether you’re a first home buyer, seasoned investor or looking to upsize or downsize, unfortunately, the answer is not so simple. The “best time to buy” occurs when good planning coincides with good fortune, or as the old saying goes, being in the right place at the right time, whilst having all your ducks in a line.
To help with the planning and preparation side of things, there are three essential factors, each having three main questions you need to consider.
1. Personal factors
a) Are you ready for the long-term commitment and discipline that comes with a mortgage?
Make sure you can stick to a budget, which undoubtedly means making some cut-backs and watching what you spend your money on. This is as much about personal discipline as it is about solid financial management.
b) Are you ready to stay in one place for a prolonged period of time?
Can you see a long-term future in the location of your property? People often stay put in one home for longer than they initially imagine, so make sure your future needs are taken into account.
c) Does the property meet your personal and lifestyle needs?
This is about finding somewhere that meets your practical needs (for instance property type, location, design, and layout) as well as your personal desires (such as a home that reflects a sense of achievement or a place where you can see yourself starting a family).
2. Financial factors
a) Have you prepared a budget?
You must work out how much you can reasonably afford based on your after tax family income. To do this you need to determine your borrowing power and your purchasing power, which together will inform you about which properties are in or outside your price range.
b) What can you afford to borrow?
Can you meet your mortgage repayments on time, every time? This is where buying in a low interest rate environment can be helpful but you must be careful not to over-borrow just because finance is cheap. Remember rates can increase and you need to allow for contingencies like dropping to a single income, if starting a family is on the cards. Click here for a handy mortgage repayment calculator.
c) Have you saved a hefty deposit?
A good sized deposit (which I define as at least 10% of the purchase price) will help reduce your borrowing requirements, act as a safety net if things go wrong, and demonstrate to you and your lender that you have the discipline to make and stick to regular financial commitments.
3. Market factors
a) Have you considered seasonal factors?
During spring and summer there trends to be more properties on the market and therefore better choice. On the flip side, there is also more competition for quality properties. Autumn and winter tend to be quieter periods with fewer sellers but also fewer buyers, so take into account the time of the year as to which scenario appeals to you more.
b) Have you taken into account the property cycle?
Property prices move in cycles, so the trick is to buy near the bottom of the market and before prices peak, but of course this is hard to foresee. Keep an eye on the general level and direction of property prices to assess the current point of the property cycle.
c) Have you considered the level and direction of median property prices?
This is about looking at the performance of specific suburbs and streets you’re interested in buying into, which may or may not follow the state or national trend. Again, do you research, follow sales results and speak with a Naked agent for advice and guidance.