The stars have aligned. This is the best of all possible worlds.
Has there been a better time to buy than right now?
I mean there was. 5 years ago would have been an amazing time to buy. 15 years ago would have been spectacular.
But in terms of trying to time the market, could there be a better time than right now?
Now I’ve said before we shouldn’t get too caught up on trying to time the market. A great deal is a great deal, regardless of where the market is at.
But still when the market rises, there are easy gains to be made, and who doesn’t love that?
So I’m here to tell you that right now is an awesome time to be shopping.
There’s five reasons for that:
This is still a buyers’ market. We’re at a stage in the cycle where vendors are not getting the prices they’re after. Vendor discounting – the difference between a seller’s initial sales price and the price they actually end up getting – is at a cyclical high.
This is still a market for finding bargains and negotiating great terms – things like extended settlement and all that. These things become much harder when the market is hot.
They’ll be much harder in 6 to 12 months.
Why? Because rate cuts, for starters. The markets now have two rate cuts this year as a practical certainty. The RBA has made it very clear that rate cuts are coming – the first will probably come in June.
Rate cuts have consistently been the number one driver of house prices. When rates go down, people can borrow more and so house prices go up.
It’s simple mathematics.
The impact isn’t instant though. But expect it to show up in the data by Christmas.
Over the past couple of years, APRA – the banking regulator – has been the biggest influence on the market. It really came down hard on the banks, forcing them to tighten up their lending standards, and cutting back on credit.
This week, APRA signalled it was willing to start backing off. The first phase of that will see them relax away from the 7% stress test. Until now, banks had to assess borrowers against 7% interest rates, even if they were offering them 3.5% and there wasn’t a snowball’s hope in hell that rates were going to 7% any time soon.
Banks will still have to give borrowers a buffer, but it’s not going to be anywhere near 7%.
This means that borrowers will find it easier to access more money. That in turn will feed through into prices.
In the last week before the election the government announced a first home buyer deposit scheme.
Effectively first-time buyers who can raise a 5% deposit can tap the government for a further 15%, to get them up to the 20% deposit most lenders require (and which means they can duck Lenders’ Mortgage Insurance – LMI).
It’s not a grant, but it effectively works like one, and it will push up prices, particular at the cheaper end of the spectrum.
And of course the big news out of the election is that negative gearing is here to stay. As far as the property market is concerned, it’s business as usual, and this will give the market some much needed confidence.
Put it together and you have perfect buying conditions. Rate cuts, credit easing and direct stimulus are all on the way, at the same time as sellers are still willing to cut a deal.
That won’t last long. I reckon the window is about six months.
So it’s time to buy. And if you’re not ready to buy right now…
… then it’s time to get ready.