Is now a good time to buy or sell a house?
It’s difficult to know when is a good time to buy or sell property. As well as personal considerations, when to buy or sell is impacted by the current and future state of the market, plus wider social and economic factors affecting housing prices.
It sounds complicated, so to make things clearer, let’s take a closer look at the market right now and what factors are in play.
Property prices rose +28.6 per cent nationally from the pandemic trough to the recent peak, making it one of the largest booms in Australian history.
With interest rates now rising rapidly, though, prices have been on the decline as buyers face reduced borrowing capacity and heightened affordability pressures.
CoreLogic's July 2022 report shows that home values are declining in most cities, with others experiencing significantly reduced rates of growth.
Sydney and Melbourne have been hit hardest, falling by -2.2 and -1.5 per cent respectively in just one month. Hobart also saw a substantial dip of -1.5 per cent.
Brisbane, which continued to boom long after Sydney and Melbourne had cooled, has also entered negative territory, losing -0.8 per cent in July. Canberra too was down -1.1 per cent.
Adelaide has remained the strongest growth city in 2022 but looks to have shifted down a few gears, posting gains of only +0.4 per cent. Perth and Darwin, meanwhile, have remained relatively stable.
Regional markets have outshone the capital cities throughout 2022, retaining healthy growth over the first half of the year. That dynamic has now changed, with regional areas also entering a downturn in June and July.
"The rate of growth in housing values was slowing well before interest rates started to rise, however, it’s abundantly clear markets have weakened quite sharply since the first rate rise on May 5," CoreLogic Asia Pacific's Head of Research Tim Lawless said.
"Although the housing market is only three months into a decline, the national Home Value Index shows that the rate of decline is comparable with the onset of the GFC in 2008, and the sharp downswing of the early 1980s. In Sydney, where the downturn has been particularly accelerated, we are seeing the sharpest value falls in almost 40 years."
In Sydney and Melbourne, median house prices remain at all-time highs. So, while prices are beginning to decline, they're coming down from an exceptionally high point that's made affordability a serious issue for many buyers.
First-time buyers trying to enter the market are particularly impacted by these high prices. A higher selling price means saving for a larger deposit and increased stamp duty, on top of the other hidden costs of buying a home. Now, with several interest rate hikes already in place and more likely to come, buyers face a further reduction in borrowing power over the coming year which may make things trickier. On the other hand, many forecasters say property prices should fall substantially as a result, so it's possible that buying power may balance out with discounted sale prices.
Those looking to upsize the family home have faced serious challenges this past year with a record gap between median house and unit prices. The market downturn could be good news for upsizers, though, as an overall reduction in home values means a smaller price gap up to the next property.
Anybody looking to buy and sell in the same market will also find relief on the buyer's side of the process. While selling has become more difficult due to reduced buyer competition, that same dynamic will be a major benefit when it comes time to purchase.
Property expert Michael Yardney says low rental vacancy rates and rising rents are also impacting the market. He sees the reopening of international borders and the return of overseas students putting increased pressure on the rental market in 2022. With this upswing in demand, investors could hit the market in droves, seeking a healthy return from ongoing rental rises.
For buyers and sellers, there are plenty of national and regional factors to consider as we head further into 2022. Fast-rising mortgage repayments could further hamper affordability for first-time buyers.
Supply and demand remains a major issue. CoreLogic’s director of research, Tim Lawless, points out there’s a lack of properties in cities where prices are rising fastest. Some stock levels have risen above average – compared to a year ago, Melbourne’s advertised stock levels are +5.5 per cent higher, and Sydney’s +6.3 per cent higher. Tim equates these rises to a combination of newly listed properties and weakened buyer demand due to decreased affordability, rising mortgage rates, and declining sentiment towards the market.
Regionally, ongoing demand for liveable housing options out of the major cities is expected to continue post-Covid, with low supply continuing to push prices up.
When it comes to price forecasts, many economists are predicting a peak-to-trough fall of 10 to 15 per cent or more based on the speed and severity of interest rate hikes as well as the resulting hit to borrowing power and consumer sentiment.
Anyone asking should I sell my house now might consider the slowing trend in house value, with experts predicting price drops in 2022 and a substantial market correction in 2023. This will be felt month to month in house price, and sellers should watch their local market closely.
Right now, median values remain high. Investors asking 'should I sell my investment property?' might see their chance now or hold out for the predicted upswing in rental demand.
The question of should you sell your house now depends on your situation, including location and property type. You can use an online estimation tool to find out the approximate value of your home, but nothing beats speaking to a professional.
For owner-occupiers, when is a good time to buy a house depends on personal circumstances, and affordability remains a major factor. With further mortgage rate rises predicted, buyers should consider not just current housing price, but the ongoing cost of repayment. However, reduced buyer competition means favourable conditions for those looking to purchase.
Investors asking should I buy property now or wait should weigh up the changing rental landscape.
When is the right time to buy or sell a house? There’s never an easy answer, but with these factors in mind, you can decide if it’s the right time for you.