What to consider when buying a home in today’s market

RACQ28/03/2023
Money

RACQ Bank Head of Lending Medina Cicak looks at what we might expect from the property market after some turbulent times.

Generic pic of working on finances to buy a house.
When I look back at the changes in Australia’s property market over the past few years, it feels like I’ve been on a rollercoaster, full of ups, downs, twists and sharp turns. 

The pandemic brought with it an unforeseen surge in property prices followed by rate rises not seen in more than a decade. This, coupled with increased competition in the housing market, had a profound impact on spending leading to high inflation.   

There is no denying these twists and turns may have left many homeowners, potential buyers, sellers and investors feeling confused, overwhelmed and unsure about what to do next. 

Despite the negative headlines, there’s still optimism about Queensland’s property market if you take a long-term view. 

Demand remains strong, particularly in the south east, as more people from all over the country look to call the ‘sunshine state’ home.

In last year’s Census data, Queensland topped the list of all states and territories in terms of interstate migration net gains (over the previous five years) and almost 220,000 people are tipped to migrate here from the southern states over the next five years, according to a Property Council of Australia report. 

RACQ Bank is helping Queenslanders get even more

Property values in greater Brisbane rose by as much as 43% after the pandemic (according to CoreLogic). 

So, while we have experienced a dip from its peak (10.9% from June 2022 to 28 January 2023), we’re still ahead of where we were this time three years ago. 

This should provide comfort to those who bought a good quality home at the height of the pandemic, recognising the long-term potential of their investment. 

The rental market remains very competitive, which can be a double-edged sword for those looking to find a property. 

And with long-term infrastructure investments planned ahead of the 2032 Olympics, Brisbane will continue to be an attractive destination for people looking to move.

At the same time, unemployment rates are still at low levels not experienced since the 1970s when our economy was very different.

New builds are down on previous years, largely due to the significant cost pressures facing the construction industry as a result of the availability and price of trades and materials, which is likely to see a growing demand for established properties. 

While these are all positive indicators, it is critical that people take a balanced view when assessing their property options. 

  • Firstly, while there are early signs of inflation slowing, indicating the 10 rate hikes might be starting to work, the RBA is still trying to slow down the economy by reducing spending. This means we could see further rises this year. 
  • Another consideration and potential challenge for some prospective home buyers is their borrowing capacity. Higher interest rates may affect people’s capacity to borrow and this can be particularly challenging when property prices are at the levels we’re seeing. You can always adjust your purchase criteria to reflect what you can afford based on the interest rates today. 
  • In a rising interest rate environment, competition is strong among banks. It’s important to find a home loan option that works for you and your individual circumstances. For example, RACQ is one of the few banks to offer extended loan terms which are designed to support people who want greater flexibility in their loan repayments. This doesn’t mean you’re locked in for the full extended term – you can still make additional repayments or pay out your loan earlier should your situation change. Importantly, this solution gives you choice. 
For most, buying a home is one of the biggest financial decisions you can make. 

Remember you’re not alone.

Reach out to your bank or broker who can provide you with information and support for every step of your home ownership journey.  
 
The information in this article is general advice and does not take into account any person's particular investment objectives, financial situation or needs. Before acting on anything based on this advice you should consider its appropriateness to you, having regard to your objectives, financial situations and needs.
 
Buying a homeBorrowingFinancial wellbeingHome loanPropertyRenting

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