At the beginning of 2021, the trouble many buyers were facing was that there simply wasn’t enough stock on the market – supply was far outstripped by demand. Since then, as the year has progressed, many more sellers are taking advantage of favourable market conditions and supply has increased. However, it seems no one has told buyers this and there is still very high competition in the market, with properties selling for very high figures – far outstripping the asking price and suburb medians.
The Australian published stats recently show Melbourne property prices are increasing at a rate of over $614 per day or $21,150 per month (based on Core Logic Q1 housing data). Basically, the longer you wait to buy, the faster the market is going to get away from you – impacting what you can afford to purchase.
With the market moving at such as pace, you may find property you were looking at within your budget just 3 months ago is now out of your reach. Here are some strategies you can implement to ensure you stay in the game when the market is moving quickly.
Improve your borrowing capacity
We’ve written another article on this topic recently which you can view here. The top tips from Vincent Moore are:
- Reduce your existing debt. Reducing credit card limits is such an easy one to do (and can often cost nothing) or paying out a loan with not much owing but with huge repayments can increase capacity hugely.
- Increase your income (much harder than reducing your debt, asking your boss for a pay-rise is not always an option).
- Purchasing with a partner is often a good solution. It’s obviously not for everyone but it’s best for some clients to wait until they are in a position where they are comfortable buying with a partner as it might double (or more) their borrowing capacity.
- Reducing your living expenses is another one. If your living expenses are very high, then reducing these over a couple of months could allow you to borrow significantly more
Get your pre-approval in place at the maximum available amount
From the beginning we recommend when you apply for pre-approval that you apply for the maximum you are allowed to borrow. It doesn’t mean you have to spend all of this, it just means you don’t have to reapply for pre-approval down the track if you find something a little higher than you originally wanted to buy for.
We’ve had a number of clients recently who had applied for a lower amount based on what they thought they wanted to spend. They then had to apply for increases to attend an auction or make an offer when the price increased. Unfortunately pre-approvals can take several weeks with some lenders so this can really slow down the process and result in you missing out on the property you wanted.
Expand where you’re looking
You might have a particular suburb in mind that you choose to live in however if the market is moving quickly and you’re being priced out, taking a look just one suburb over may be an option. Rather than focusing on one suburb alone, the suburbs that border it may only be a street or two away from your desired location but be less hotly contested. You may find yourself saving as much as 20% in some instances, whilst still being in the same general area you were originally looking at.
Look at what your must haves are
There are lots of things we might want in a home, but there are some things that are going to be essential. If you’ve got a family of six, a two-bedroom home is going to be a squeeze so your essentials will be extra bedrooms. A couple downsizing wouldn’t necessarily have the same needs, nor would a single person looking to buy alone.
Make a list of what is essential and an additional list of what would be nice to have if the right property came along. When you are conducting your search, stick to those essential things first and then if your budget allows, you can consider extending your search parameters for those nice to have elements.
Waiting it out
Some people are choosing to wait and see where the market goes. You could do this, as you can see in the table below from 2017 the Australian property market dropped quite a bit throughout 2019 however the trend is generally upwards.
Source: Global Property Guide
You could try and time the market and buy in a downturn, although we tend to find it’s best to buy when the time is right for you. Time in the market is generally a better strategy than timing the market (as evidenced by the above graph). Throughout 2020 experts at the major banks predicted that the market would drop by anywhere from 15%-32% throughout 2021 which has clearly not been the case! This might not be the best strategy unless your savings are increasing at a pace exceeding the growth of property prices.
Level the playing field
Get a Buyer’s Advocate on your side and level the playing field. Entourage Property offers a Buyer’s Advocacy service in Melbourne helping our clients to purchase in a very competitive market. Looking at off-market properties and leveraging our relationships to get access to property before it hits the market gives a competitive advantage to our clients that those simply looking online don’t have.
Get in touch here and see how we can help support you buy property in a rising market.