It’s the million-dollar question for every investor – when is the right time to buy property? Unless you are equipped with highly sophisticated data analytics or a magical crystal ball, it is pretty darn challenging to predict market dynamics. Property markets are no different to any other investment market and are in a constant state of flux, and the performance of your investment can be drastically different depending on whether you buy in a hot market or cold market. So, since trying to time property values and mortgage rates is nigh on impossible, how do you know when is the right time to buy property? Well, we’ve outlined a couple of key factors to consider to help you figure it out.
Do you have enough cash to secure a deposit?
This is really the first question you need to ask yourself before you even consider going property shopping. Most banks are happy with a loan value ration (LVR) of 20% of the purchase price, but don’t forget stamp duty, legal and borrowing costs are additional fees that you need to consider. Having enough cash outright or in equity is crucial to secure a loan.
Do you have enough cash flow to make loan repayments?
What this means is how much cash at hand do you have to be able to pay back the loan? As a general guide, no more than 33% of your income should be dedicated to mortgage repayments, and any higher than this could put you at risk of defaulting further down the track. Being approved for a home loan is one thing, but being in a financially comfortable position to pay it back is another.
What are your current personal circumstances?
If you were to buy a home tomorrow, how much of an impact would that have on your life? Are you dealing with family or personal illness, job insecurity or another issue that could affect your living arrangements? If you have children you will need to consider school schedules and locations, and as moving can be very stressful, it may be best to hold off until the move doesn’t interfere with study or work obligations. Of course, as everybody’s personal matters are different, so will your decision on how convenient a move is at this time.
Are you ready for a long-term living arrangement?
If you’re still at a time in your life when nothing is certain and you’re not even sure if you’ll still want to live in the same town in 12 months, then perhaps buying a house isn’t the best decision for you at the moment. Aim to purchase a house with a five to ten-year plan in mind. There are a lot of costs involved with buying a property and if you’re planning on moving again in the short term it may not be worth your troubles just yet. Also, as an investment, long-term mentality is always the safest option. Buy in the right area with the right fundamentals and your asset is sure to go up in value over time.
How desperate are you?
Is it urgent that you buy now, or can you afford to hold off a little longer? Buying a property under pressure is generally a bad idea as you’re more likely to agree to unfavourable terms or pay more than you intended. When you have the time to shop around, see what else is available and negotiate effectively, you’re less likely to accept a pricey offer simply out of urgency and desperation.
So, when is the right time to buy property? Well the bottom line is that it’s really up to you. Don’t try to time the market, just evaluate your situation and make an informed decision based on a little bit of research and common sense.