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Now could be the perfect time for those considering buying a home to get on to the property ladder.
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Market gives home buyers a unique opportunity

So, you’re keen to buy a home; you’ve done the research, got your loan pre-approved, and you’ve been watching the markets like a hawk… but when’s the right time to take the plunge?

Well according to leading property analysts CoreLogic now is the perfect time.

Why? Because new figures released this month indicate a price fall in the market for the ninth consecutive month in June, creating plentiful opportunities for those who want to get on the ever-elusive property ladder, regardless of whether you already own a home and are looking to invest, or you are taking the plunge for the very first time.

The Reserve Bank of Australia also announced that “Housing credit growth has declined, with investor demand having slowed noticeably.” Basically, this means the market is ripe to welcome first home buyers and those looking for a bargain.

And the Australian Prudential Regulation Authority (APRA) has recently come down hard on investors and investment loans are now much harder to get than they used to be.

Add to that the fact that Australian houses are 1.3 per cent below their peak in September last year and it seems like first home buyers could definitely have the leading edge in the market right now.

CoreLogic’s Research Director Tim Lawless says the price plunge could leave recent home buyers in a precarious position facing “negative equity” and with a mortgage worth more than the value of their home.

Despite recent and consistent monthly falls, CoreLogic says national dwelling values still remain 32.4 per cent higher than five years ago.

“This highlights the wealth creation that many home owners have experienced over the recent growth phase, but also the fact that recent home buyers could be facing negative equity,” says Tim.

“Tighter finance conditions and less investment activity have been the primary drivers of weaker housing market conditions and we don’t see either of these factors relaxing over the second half of 2018, despite APRA’s 10 per cent investment speed limit being lifted this month.”

 

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The largest market decline amongst the capitals over the June quarter was in Melbourne, with dwelling values down 1.4 per cent.

Tighter finance conditions and less investment activity

The CoreLogic report states that the June quarter results saw national dwelling values fall by half a percent, driven by a 0.8 per cent drop in values across the combined capital cities.

It also said the capital city decline was partially offset by a 0.6 per cent rise in values across the combined regional markets. The largest decline amongst the capitals over the June quarter was in Melbourne, with dwelling values down 1.4 per cent, followed by Sydney (-0.9 per cent), Darwin (-0.8 per cent) and Perth (-0.7 per cent).

And in Tasmania Hobart continues to show the strongest capital gain trend amongst the capital cities with dwelling values rising a further 2.3 per cent over the past three months.

CoreLogic said the declines were more pronounced across the most expensive quarter of the market, largely due to Sydney and Melbourne where the upper quartile of property values has fallen 7.3 per cent and 2.5 per cent respectively over the past 12 months.

“A surge in first home buyer activity has helped support demand across the more affordable price points in these cities,” explains Tim.

“With lenders now focusing more on overall debt-to-income ratios and household living expenses, housing markets where prices are high relative to incomes could see less activity as prospective buyers find their borrowing capacity reduced.

“Additionally, with the federal election campaign imminent, we could see investor confidence impacted further if changes to taxation policies related to investment housing are debated.”

Governor of the Reserve Bank of Australia Phillip Lowe said in a statement released on July 3 that the cash rate would stay on hold at 1.50 per cent and the bank would maintain a firm watching brief on the market.

“Nationwide measures of housing prices are little changed over the past six months. Conditions in the Sydney and Melbourne housing markets have eased, with prices declining in both markets. Housing credit growth has declined, with investor demand having slowed noticeably. Lending standards are tighter than they were a few years ago, with APRA’s supervisory measures helping to contain the build-up of risk in household balance sheets. Some further tightening of lending standards by banks is possible, although the average mortgage interest rate on outstanding loans has been declining for some time.”

With growing pressure on lenders to lift mortgage rates amidst an ever evolving market it does seem like now might be exactly the time to jump in at the deep end and grab yourself a bargain.

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Beverly Ligman

Beverly Ligman had a successful career in the newspaper, magazine and publishing industry writing and editing for Fairfax Media, News Ltd, WA Newspapers and various magazines in London, Melbourne and Perth before she decided to make the move into public relations and media consulting five years ago.

The opinions expressed in this article are the opinions of the author(s) and not necessarily those of Homeloans Ltd.