Is This Actually A Great Time To Buy?

August 26th, 2022 - by Brad Gillespie

Read the media reports on Sydney’s property market, and you’re likely to be left feeling overwhelmingly pessimistic.

However, the same factors that are making some fearful about entering the market, declining prices and rising mortgage costs, could actually be working for you rather than against you. We explain why.

Where the market is at right now

In 2021, Sydney’s property market experienced extraordinary growth, with CoreLogic reporting that the median property value rose by 25.5%. So far, however, 2022 has been a very different story. The most recent CoreLogic data shows that, since peaking in January 2022, the median Sydney property value has shed -5.2%.

One of the key reasons for this change, of course, is rising interest rates. The RBA has lifted the official cash rate four times in four months, taking it from its pandemic emergency level of 0.1% to 1.85% - and most commentators believe it still has some way to go. However, astute observers will have noticed the RBA didn’t raise rates until May 2022, but values began declining in February 2022 - so it’s not the only reason for falling prices. A fall in consumer sentiment, rising inflation, and even low yields (more on that later) also played their part.

The factors working in your favour

If you were thinking of buying, these factors might sound like enough to put you off. But we don’t think they should. There are actually several upsides to buying in a transitioning market such as the current one.

  • There is less competition for properties. There has been a noticeable drop-off in buyers since the start of the year. So if you’re looking for a home, you’ll have less competition.
  • Stock levels remain the same. Despite there being fewer buyers, SQM data shows that the number of properties for sale across Sydney has remained reasonably consistent over the past couple of years. That means you’ll be able to take your time and find a place that really does suit your needs. You’re also likely to be able to get it at a better price.
  • The gap between properties has been reduced. A market such as this one is often the perfect time to upsize because the gap in value between the home you’re in and the one you want to buy is likely to have fallen. Say, for instance, at the start of the year, your current home was worth $1.3 million, and the one you wanted to buy was worth $2.5 million - a difference of $1.2 million. If both properties’ values fell by 10% your current home would be worth $1.17 million and the one you wanted to buy would be worth $2.25 million - a difference of $1,080,000 and a saving of $120,000.
  • There is significant support for first-home buyers. Both the NSW and Commonwealth governments offer generous support for first-home buyers. Although many of these limit the maximum value of the property you can buy, falling prices mean you’re more likely to qualify.
  • There is still a lot of competition in the lending space. Despite rising interest rates, lenders are still competing hard for business and market share. So if you need to finance your purchase, you’re likely to be able to get a very good deal.

Investor activity on the rise

One sign that this could be a good time to buy is the return of investors into our local property market. We’ve noticed a definite rise in the number of people looking to buy an investment property. This is supported by ABS data showing that investors are making up an increasing proportion of new loans.

Property investors tend to look to the long term, and they know that, even if prices aren’t rising at the moment, it’s likely they eventually will.

Another reason investors are active right now is that rents are rising. In fact, Domain reported that rents across Sydney rose by 9.1% in the year to March 2022 - their fastest rate in 13 years.

This may make it tough for tenants, but it is welcome news for many landlords, who rely on rental income, because yields have been decreasing over the past few years as property prices rose.

In fact, in January 2022, the median Sydney yield was just 2.4%, according to CoreLogic. It has since risen to 2.8% and looks set to grow further still.

Is it also a good time to sell?

While 2022 may actually be a good time to buy, it may not be a bad time to sell either. After all, most sellers are also buyers and, as we’ve shown above, the smaller gap between property values means you could find you need a smaller mortgage. You’re also likely to have more choice when it comes to the property you move onto.

The property market always rises and falls, and there will always be a reason not to buy or sell. However, the long-term trend for quality Sydney property is for its value to rise. Rather than trying to ‘time the market’, you’re better off buying and selling when it suits your lifestyle and finances to do so.

Want more?

Contact our team today to find out more about how we can help you buy and sell in Sydney’s inner city and inner west.