The property price downturn has seen Sydney house prices fall 10.1% and the median house price drop to $888, 117 (ABC News). Prices for similar properties that were selling around 12 months ago, are likely to be lower. This presents some pitfalls but also massive opportunities to enter the market as well as maintain your spot in the market.
The Pitfall: Don’t get caught paying too much
Don’t jump straight in if a property seems, all of a sudden, very cheap. Take a closer look at the numbers to make sure you’re still not paying too much. I’ve seen many people pay too much, not only in a rising market but in a falling market too.
Take a property valued at $1, 000, 000 last year, now selling for $900, 000. It may seem like a good deal, however if the market for that area has dropped by 15%, for similar properties, it should actually be selling for $850, 000.
The opportunity: Use the downturn to boost your cash reserve
With the same budget you had 12 months ago, you may be able to purchase a slightly newer home or a home in a slightly better area within a close proximity to shops and schools.
The biggest opportunity is being able to pick up the same type and style of property in the same area (that you would have been over the moon with last year), for a lower price. This means more money in your pocket for a rainy day.
Your loan may still be for the same amount, however, you will now have extra funds put aside to protect your position.
The opportunity: Know your numbers
In a cooling market, it’s not likely that houses are going to disappear in minutes, so it’s the perfect opportunity to take your time and do proper checks on the property quality and affordability; how does it fit in your budget?
Due diligence will never harm you in the long run!
The opportunity: Protect your income
Buying a property is a large investment and often the biggest transaction most people will make, however large debt means getting out of bed and going to work each and everyday. So what happens if you can’t work?
If you suddenly get injured or become ill, you don’t want to be financially stressed and fear losing your recently purchased home. Income protection insurance covers these unexpected events. If you have snapped up your property for a bit less than last year, you could use the savings to cover yourself and your family with income insurance.
If you would like to discuss your personal situation, we’d love to hear from you!
*Please note that the information provided is of a general nature only and has not been tailored to your personal circumstances. Please seek professional advice prior to acting on this information.