Is this a good time to buy a house?

by Chris Lang on August 3, 2010

House in question I’ve been waiting for a good time to buy a house over a year now. But contrary to what I was hoping for, house prices kept on rising, against all my logic, against reason, against common sense. For the last year and a half I’ve been asking myself this question a lot – is this a good time to buy? If I don’t buy now, will I regret it tomorrow? Will I say to myself “Should have jumped on that opportunity a year ago, when I had a chance“?

The thing is, I can’t force myself to pay what I believe to be an outrageous price for a house that is not worth it. Even in moments of weakness when I think to myself “Gosh, would I love to drop this search and finally settle down, to forget about this house-hunting madness”, still there is a stubborn voice in my head telling me that I’ve got to be crazy to pay THAT much for that rotten old house in a noisy street with a construction site next door.

If this is what you think, too, then there may be a light at the end of the tunnel for us.

I was hoping that rising interest rates will do the trick to bring the demand under control and stop pushing the prices higher and higher, but that alone clearly wasn’t enough. I was waiting for the statistics to kick in, so that after an unbelievable period of strong growth we would see house prices plateau or return to realistic levels, but that just wasn’t happening.

Finally, after 17 months of strong gain, the latest RP Data-Rismark property index has shown a downturn, a 0.7% decline in June. Not much, but that’s all there is – I’ll take it.

However … there is something else that, according to the report from RMIT, may affect house prices – the election. According to the paper, over the past four decades, Melbourne home prices have risen by 1.21 per cent a quarter in the year before a federal election, compared to 0.84 per cent a quarter in the year after. And if we look at it on the state level, there was a 2.3 per cent rise in the year before a Victorian state election, compared to a 0.6 per cent increase in the year after.

Although interest rates are not a big help this month (today RBA made a decision to leave interest rates on 4.5), but perhaps there will be another rise later on this year. So combined together, the predictions based on this study and the anticipation of more interest rates rises are giving me a reason to believe that the next 6 – 12 months could be a good time to buy a house.

Now, what do you think, when is a good time to buy a house?

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{ 3 comments… read them below or add one }

Steve Basin August 27, 2010 at 4:46 pm

Thanks Chris for your post.

When is a good time to buy a house? Well yesterday, next best time today!

Contrary to outside influences like interest rates, unemployment, immigration etc, no matter if its shining or raining, property has consistently risen 7-10% per year, doubling in value every 7-10 years.
Just look at the history of property for the last 100 years, where we had all sorts of outside influences, like the great depression in the 30’s, world wars I and II, oil catastrophe in the 70’s, share market collapse in the late 80’s, yet property consistently trended up.
Yes there may be peaks and troughs here and there, but the general trend is up.

Take a look at cities like London or New York, most people can’t even afford a 1 bedroom flat or a shack, signing a long leases instead is the general norm there.

Australia will be no different, people want to live near the CBD, infrastructure, schools, shops etc. There will always will be a demand for them, and with population growing, it will get that much harder, day by day, year by year.

Supply (Land) Vs demand (population) equation….

Land is limited, Demand is high – you do the maths…

So to answer, yes its hard to get in, but it will get harder as time goes on.
Do your research, work extra hard and you may be surprised that one day you’ll find yourself a bargain!

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Angela August 30, 2010 at 11:39 pm

Buying a house is good at all times. As Steve said, property has showed very strong returns over the long run.
The issue is that when we talk about property we rely on statistics.
Expensive properties that have the “wow” factor (location, location, location) will always do better than others and they tend to double every 7 – 10 years. The others are still growing, but at a lower rate.

So paying a high amount for “a rotten old house in a noisy street with a construction site next door” may be a good thing if that house is in a sought after neighbourhood where the housing stock is revitalised (construction site!). You may be able to sell it at a good profit in a couple of years.

But you may as well decide that you want to pay less for a newer house in an outer suburb. You won’t grow your equity but you may enjoy a more tranquil life. It all comes down to your goals and priorities.

From what I understand, prices in Melbourne have shown higher growth than in Sydney, where there are some indicators that the market is cooling.
On the other hand our strong economy, population, smaller household sizes and low building activity can continue to push prices up.

If I were you I would buy a house. Rents won’t get any cheaper.

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Saccha September 2, 2010 at 12:26 pm

We work hard to be able to pay the rent, provide for the family, send the kids to school, and to have something left come retirement age. That is why it is very important that we get what we pay for. This is especially true when it comes to purchasing (house and) lots. After all, these houses are where we will be leaving a legacy to the next generations. Anyway, thank you for your article, it is an interesting and informative read.

Also, you might be interested to read about certain laws when it comes to land boundaries. The article I stumbled upon talks about whether or not you can claim a piece of land that was accidentally placed under your neighbor’s fence.

Read the original article here

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