Welcome to Australia’s property market, it’s boiling hot with minimal signs of cooling down.
According to data from CoreLogic, Australian capital city property values have increased by 26.17 per cent on average over the past five years. In Sydney, the average house price is predicted to skyrocket by $216,000 this year alone.
As Australia’s property boom continues and prices climb relentlessly, there is a striking imbalance of supply and demand, with competition to buy a home more fiercer than ever before.
If you’re looking to buy your first property, here are a few things you should consider.
1. Due your due diligence
Like any big purchase, if you’re looking to buy your first home, you should do your homework and research. This is well before attending any auctions or filling out any application paperwork. Are there any additional costs that come with the property, such as an owner’s corporation fee?
More on this: Look out for the extra costs of buying a home
Do you want to buy a home that needs some work? Or is your goal to build a new dwelling? You may need to comply with heritage restrictions, permits or limits on the land or bordering properties. Before you make a decision to avoid any expensive surprises, consider requesting a Section 32 report from your local council. It might also pay to consult with an independent building inspector.
It’s a good idea to understand how much you can realistically afford. Which suburbs and types of properties are within your reach? What’s your estimated purchase and settlement timeline? You should also research the street, the area and consider who your new neighbours might be.
2. Have your finances ready to go
It’s essential to get your finances in order and be prepared to act quickly.
In a less competitive market, many have the luxury of viewing the property, then going home to crunch their numbers or talk it through with their advisors or partner. You can then return a week later for a second viewing of the property.
In today’s market, those that opt for that strategy often miss out. Other more prepared buyers with a plan of attack will beat you to the punch.
By doing your due diligence and getting your home loan pre-approved by your mortgage lender, the odds will be in your favour when it comes to landing your dream home. When you are looking for pre-approval, make sure you are able to give yourself enough time.
TIP: Shop around for the best low interest competitive rates for your home loan before you start looking at properties. Non-bank lenders like WLTH have competitive variable home loan rates at 1.99 per cent (Comp Rate 2.05 per cent), which could be a smarter alternative than a Big Four mortgage.
3. Keep your options open
Buying property is one of the most emotionally-charged investment journeys most people will embark on. To make it a pleasant and successful one, ensure you have a solid strategy in place and set realistic expectations.
More tips: 7 steps to buying a home you can afford
What is your absolute top price? What are your non-negotiables and what are nice-to-haves? Will you be the first bidder, or will you have a representative bidding on your behalf? Perhaps a high-stress auction environment isn’t your thing and you’d prefer making private offers.
In a hot property market, properties are snatched up quickly, so be prepared to potentially be outbid during an auction. Be aware that eager house-hunters may submit an offer before the property ever sees a realtor’s hammer.
Don’t be disheartened. Instead, remember that buying a property can be a lengthy process. If you’re unlucky a few times, it could be time to re-evaluate your options and consider other locations or types of properties that might be more attainable.
4. Avoid low-balling and know your limits
Rather than going in with a bottom rung offer, in order to be taken seriously it’s best to be realistic. Make a bid within the ballpark of what the vendor is looking for.
If you draw out the negotiation process for too long, you run the risk of putting off the vendor and opening the floor to a bidding war.
Consider whether the asking price is fair for the location and dwelling size, based on comparable sales in the area.
You can also try to negotiate on factors other than price. These might include facilitating an early or delayed settlement, a fast-tracked deposit, or even cutting a deal that includes the existing furniture or fittings. Consider ways to make it easier for the vendor to buy their next property. Or factors that give the vendor more flexibility when moving into their new home.
While it can be easy to get caught up in the heat of trying to secure a property, be aware of your limits. Understand what you can afford. In many cases this might mean walking away if the deal isn’t right.
5. Don’t be afraid to ask for professional advice
With markets more competitive and stressful than previous years, it’s a smart idea to enlist the help of qualified professionals to ensure a more seamless experience.
This may include a mortgage broker to verify whether your finances are structured to meet your needs. Or a financial advisor to run you through the realities of home ownership. A licensed home inspector can pinpoint any issues in a property. You might also consider using a buyer’s advocate who has access to homes off-market.
In particular, finding a good buyer’s advocate can be your most powerful tool, since they can use their deep relationships with real estate agents and property networks to negotiate and facilitate a great deal on your ideal property. Often before it’s even posted on any listing website.
While buying in a hot property market might seem risky, it’s important to remember that there are good opportunities still out there. Especially if you do the hard work and understand all of the options available.
Brodie Haupt is the co-founder and CEO of digital lending and payments platform WLTH.