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Is now the time to buy property?

Two people looking at an open house sign displayed outside of a property.
Rising interest rates are cooling Australia's red hot property market. (Source: Getty)

With the Reserve Bank (RBA) raising interest rates for the second straight month, many current and future home buyers are asking: “Is it time to start seriously looking to get on the property ladder?”

My answer to this eternal question non-homeowners keep asking themselves is: “Look but don’t get serious yet.”

Also by Peter Switzer:

Home sales data recently showed two in five Sydney homes failed to sell recently, with clearance rates down to 59 per cent. Melbourne’s clearance rate was 61 per cent, while the national figure was 62 per cent.


In contrast, Adelaide is still doing well, with a recent 76 per cent clearance rate, Canberra 71 per cent and Brisbane 65 per cent.

Sellers are eager to sell but buyers now have the upper hand, with 53 per cent of properties sold before auction as vendors worry that buyers are waiting for bigger falls in price as interest rates rise.

Suburbs don’t fall at the same rate

As you can see, some markets are more prone to faster price falls because sellers are more worried about what lies ahead.

However, markets such as Sydney and Melbourne have been fast-growing areas for price hikes since May 2019, which was the month of the previous federal election, after which prices took off.

Sydney has been seen as the epicentre of Australia’s house price surge for decades, maybe centuries, and the market soared almost 27 per cent in 2021.

But interest rate rises, and talk of the cash rate going to 2.5 per cent within a year, have encouraged sellers to increase the supply of housing on the market.

Buyers are getting into the box seat as predictions of price falls give them power to negotiate, but that power will actually grow as prices fall.

Sydney’s stratospheric prices, growing supply of houses up for sale and talk of big interest-rate rises are souring people on buying right now and, if they do, they want bargains.

Boom to bust

A bar chart showing predictions for Sydney property prices.
(Source: Core Logic/Bloomberg)

Bloomberg and CoreLogic have captured the consensus call on how much Sydney’s house prices will fall, but commentators (such as Chris Joye from Coolabah Capital, who has a good track record) think after the RBA increases the cash rate by 1-1.5 per cent - from its starting point of 0.1 per cent - house prices could fall by 15-25 per cent.

How high could rates go?

Matt Comyn, CEO of Comm Bank, thinks the cash rate could be 1.35 per cent by year’s end. So does HSBC’s Paul Bloxham, but other economists think it will be higher.

It seems like a smart strategy to start looking for properties to buy, but don’t get too serious until later in the year.

Spring is when supply increases, as people like to show off their properties when it’s warm and sunny and when flowers are out. If you add rising supply to falling prices, this creates a perfect position for a buyer.

Also, remember house prices in some suburbs will fall faster than others, so if Sydney and Melbourne prices fall by 20 per cent over the next two years, some suburbs might fall by 30 per cent, while others might fall by only 10 per cent.

My tips for buying a home

  1. Become an expert on the suburbs/towns where you might want to buy

  2. Arrange your finance ahead of time

  3. Collect some experts who can help you - builders, home price data providers, mortgage brokers, lawyers, buyers agents, etc

  4. Make any property purchase as professional as possible

  5. Think about reading books on negotiation - this will come in handy for the rest of your life

  6. Buy with your head and not just your heart

  7. Don’t rush into buying unless you luckily stumble on the buy of the century, but only by improving your knowledge of real estate will you be able to see such a deal

Don’t fail to plan, plan not to fail.

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