Buying a home is one of the biggest investments most of us will make in our lives. And while feeling confident and informed is incredibly important when preparing to take the plunge, it’s easy to get overwhelmed by the wealth of information available. That is why we’ve put together a few of the key points surrounding the WA property market to help you in making your decision.
What direction is the property market going in?
Property commentators will always have different views about the state and direction of the market.
Historically, Perth has sat fourth in terms of median house prices behind Sydney, Melbourne, and Brisbane. However, currently it is seventh[1], sitting only behind Darwin. This could be interpreted as Perth presenting value against its longer-term position.
Source: CoreLogic Hedonic Home Value Index, 1 November 2022[1]
Over the course of the pandemic, national house values grew by 25%[2] – however, Perth experienced less growth. As such, commentators are currently questioning whether it will return to its historical fourth position over time.
Should I be worried about interest rates rising?
It’s important to remember that interest rate cycles are a normal thing. A standard loan term is 25-30 years, meaning you will likely experience multiple cycles – including both the highs and the lows.
Understandably, when you compare the current rates against the 0.1% cash rate from a little while ago you can work up a bit of anxiety. However, that was a record-low interest rate and was always going to return to a more normal level, with the current rates still being ‘low’ when considering past rates.
Economists are quite divided about where the peak of the current cycle will be as well as when it will be reached. Current predictions are forecasting the cash rate could peak between 3.1%-3.85%, anywhere from December 2022 to May 2023[3]. Our view is that it will be towards the upper end of this range.
Is now a good time to enter the market?
With headlines typically favouring a doom and gloom approach, it can be hard to find a balanced perspective. However, there are good reasons to be optimistic.
Currently, there are many factors that are supportive of housing prices in the longer term, including:
- Rental vacancy rates being very low[4]
- Lifts in rental values providing enticing yields for investors
- The current median prices being affordable ($559,043 as at October 31, 2022[1])
- Low housing stock being available
- Increased migration following the borders reopening putting further pressure on low housing stock
If the time has come to stop renting, move out of your parents’ home, upsize, or downsize, then it may be the right time for you – so long as you’re ready.
The key is to focus on what you can control. If you are on top of your household finances and it is possible to purchase a home while maintaining a lifestyle that is suitable for you, then homeownership may be closer to becoming a reality than you think.
Should I be looking at a fixed rate?
When choosing between fixed and variable rates, it’s important to understand that it’s not about beating the banks. Generally, if someone beats a bank, it is more luck than anything.
The benefit of a fixed rate lies in the certainty of repayments. Knowing exactly what you’ll be paying and when, making your expenses more predictable.
Some people hedge their bets and use a combination of fixed and variable – and this can be a good strategy, but it is not necessarily the right option for all. So, it’s best to consider all your options.
How to manage interest rate rises
- Never set and forget. The reason for this is simple – lenders remain competitive for your business. So, by taking an active approach to managing your home loan, you can leverage this competition to your advantage to save significantly in the long run.
- By engaging a mortgage broker to review your home loan, you ensure that you get a broad view of what’s available in the market, making it easier to find the solution that is right for you.
- If you pay attention to forecasts (or get a mortgage broker to do this for you), you can potentially save in the long run by paying more while interest rates are relatively low – thus limiting compounding interest.
- Consider the structure of your loan. Would a fixed rate suit your needs more than a variable rate at this time? Or vice versa? Or would it benefit you to use a combination? What was right for you at one stage might not be right for you at another.
So, there you have it. This is our breakdown of whether or not it’s a good time to enter the WA property market at the moment. To learn more about whether now is the right time for you, get in touch with a mortgage broker today!
Disclaimer:
Information on this page does not take into consideration your personal situation and does not constitute as financial advice.
Sources:
[1] https://www.corelogic.com.au/__data/assets/pdf_file/0019/12592/2211_CoreLogic_OctoberHVI_Final.pdf
[3] https://www.ratecity.com.au/home-loans/mortgage-news/high-will-rates-go-here-experts-think-rba-cash-rate as at 31/10/22.
[4] https://reiwa.com.au/the-wa-market/rental-vacancy-rates/ as at 29/11/2022