Expert Advice with Ahmad Imam 03/10/2018
You can’t escape the headlines that claim property markets, particularly in the large, mainland capitals, have started to fall.
Is this the leg-up first homebuyers so desperately need, to get themselves onto the property ladder at last?
Is it the perfect time to trade up from your current home, to make space for your growing family?
Should investors act now, to secure an investment property that builds a foundation under their wealth?
Or should we all just calm down, bide our time, and wait to see if the market continues to fall?
First of all – don’t try to time the market
Many a property “expert” has tried and failed when it comes to pouncing on real estate at just the right time.
Sure, it seems like a good time to sneak into the market in Sydney – some might say it’s the best opportunity there’s been in years.
But who’s to say conditions won’t improve even further?
If interest rates rise a little, or borrowing conditions tighten in the wake of the Royal Commission, this is definitely a possibility.
But you’ll only know that you missed the opportunity of a lifetime after it’s passed you buy, and conversely the decision to jump on what looks like a bandwagon will only reveal itself to be a sheer drop off a cliff once it’s too late.
So, don’t even bother speculating on the future of the market.
Instead buy when you’re ready, and not a minute sooner or later
I’m sure you’ve heard stories about would-be property moguls who “just missed out” on buying up big, pre-boom.
It’s tempting to be drawn in by this hype, but the fact remains that the only really good time to buy a property is when you are ready.
No matter what the market is doing, how great the conditions seem, or what a bargain this particular property is, if you don’t have the solid financial and personal situation to back up your purchase, it’s likely it will all end in tears.
Ask yourself, can you really afford it?
Have you taken into account not only your current financial circumstances, but also the likely (and unlikely, but possible) scenarios that you could be faced with down the track?
Have you planned for things like unpaid maternity leave, or school fees?
What about unexpected costs, like major surgery or a lengthy period off work?
Don’t forget to factor in at least a rise or two in interest rates. Make sure you can manage if the RBA raises rates in the future.
Some of the big lenders are already increasing their rates, out of step with official changes, and while you lender should "stress test" you to make sure you can cope with a rise in rates, just be aware of the possibility.
Ask yourself: Is it really the right time for you to buy?
This question is not just about money, either – your personal life should be a key driver in the decision-making process, too.
If you are buying a home to live in, then your personal needs really should dictate your timeframe. It shouldn't really matter what the market is doing as you're making a long term decision. Don't let short term influences get in the way.
If you are buying an investment property, then remeber it's a long term game. It doesn't really matter what the market is doing, because you're not buying "the market."
You are buying an individual property in the market, at the right price. The type of property that you will hold onto for the long-term, and look back on in five years time and say "Wasn't that a great purchase - gee I bought it cheaply."
The bottom line:
Don't make this massive decision, which could impact your financial position for years to come, based on market conditions.
Consider your own personal budget, goals, future plans and risk profile, and then contemplate whether buying a property now makes sense.
And if you still uncertain, an experienced independent property strategist could also be a good sounding bound to help you make the right call.
Ahmad Imam is a director of Metropole Properties in Sydney, is a highly skilled wealth strategist and a passionate property investor. He has a degree in Commerce, is a licensed estate agent in both NSW and QLD and has personally coached and educated hundreds of clients to create wealth through property.
He is a regular commentator for Michael Yardney's Property Update.
Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property.