Should I Buy An Apartment Now? That's a Big Question...and Here Are Some Answers
"Should I buy an apartment now?" In the course of my career, this is a question I’ve been asked so many times I’ve lost count. However, as you might expect it’s also a question I’m asked even more frequently when markets look unsettled.
In the lead-up to an election, when we have natural disasters or the stock market wobbles, this question pops-up in conversations, it can be formally by clients looking at a project. I also get this questions from family and friends or even the guy giving me my morning coffee. In today’s world it’s a question that appears to have a new dimension of urgency attached.
So how do I answer such a question when the market looks so fluid, with daily changes taking place, as we all absorb the impacts of the Coronavirus.
Here the sort of questions I’m now frequently being asked: ‘Peter I’m an apartment buyer looking to buy in Sydney, but now I’m not sure what to do. I know that interest rates are really very low, which is terrific, it makes any loan much more affordable – more secure and better than paying rent, I guess.’
‘But the Coronavirus is now becoming unsettling and the stock market is jumping around all over the place. Still I’m thinking keep my long-term plans in mind, and with far less competition and a secure income, could now possibly be a good time to buy? What do you think?’
My reply always has to be a carefully considered one and of course individual needs and circumstances have to be taken into account.
Lets’ start with the stock market; the Coronavirus pandemic has sent the stock market jumping around and as we all see and read the headlines it’s left many Australian’s wondering.
We are perhaps all left wondering how to handle basic needs and that’s naturally brought the housing market into question. Where we live is such a basic question and it’s a long-term one.
Then we’ve seen governments responding with evolving regulations restricting house inspections and making it harder for potential buyers to go about selecting a property an up-hill task. For such a large and important purchase, I think the reaction to online information, videos or virtual tours will be a little hesitant and already we’ve seen on-line auction results only achieve limited success.
In my view, we are at or at least very near what some experts are calling peak uncertainty, and this has reduced confidence. As we know from our experience surrounding the GFC, the banking royal commission and last year’s election, it is a lack or certainty and confidence that more than any other factors impact the residential markets. And anyone thinking of buying a new home has a lot of information to think about and to process.
However, trying to answer the question I’m being asked, I suggest that it might come down to a few very basic points, as there’s not going to be a neat answer like yes you should buy, or no you should not.
Let’s start with risk! Depending on your appetite for risk, the next few months might deliver an opportunity for first-time buyers for several reasons. There will be less competition in the market, and for example with off-the-plan buys there’s going to be extra time to plan finances.
The main hurdle will be having an extra healthy deposit and sound employment. First time buyers don’t have to worry about trying to sell an existing home, and if you have secure rental or other accommodation that’s a plus.
Also, with established properties there’s the suggested prospect that prices may ease. It’s a bit of a catch 22. Established properties might be under price pressures if current owners have commitments to buy other properties, and so they reduce their asking price.
Past experience does show us that very few transactions fall over as buyers and sellers usually adjust their expectations.
For many reasons, including social stability, governments and the banks will be aiming to keep buyers in the market, even if settlements are pushed out to the recovery stage after the Coronavirus is past.
It’s certain that interest rates look set to stay at historic lows or even go lower, and people may well take stock and enter the market now, but I’m suggesting they will be looking for more time and possibly some flexible contract terms. Terms that will secure a property but with time on their side to plan for recovery.
However there a few other pointers that always come-up in this sort of conversation, that I think rate a mention.
The current pandemic as distressing as it is, it is not a one-time event, the market has seen other big negative events and recovered. We already know that come 2021-2022 we are facing a shortage of housing, that shortage will be even more acute if over the next few months after demand slows and then recovers quickly after the pandemic.
This brings timing into sharp focus. Those with a flexible timeline or who are uncertain, might just wait and see and perhaps continue to plan and do their research for the future.
For others it will be a choice to decide if you’re willing to live with the uncertainty of what happens when markets recover, which history shows they will, but this time that recovery will be at a time of very low interest rates, rising demand and a falling levels of supply. The market looks set to go into hibernation, but after that, buyers might well have a healthy appetite for property. However, in the immediate future I hope we all stay healthy and safe as we navigate to recovery.