I was thinking about buying a property...I saw that some prices are tending to decrease. Is it a good time to do it? Or should I wait? I was waiting to have a higher down payment but maybe there are interest benefits currently that allow me to buy at an overall lower price.
Stacey in Wellers Hill, Qld
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As with any investment the decision on whether to purchase a property should be made within the framework of a broader investment (financial) plan.
Owning property in Australia over the last 30 years has certainly been a very good investment. Almost every Australian has an opinion on whether houses prices are going to pullback, crash or continue to increase in value. One thing that is important with any investment is not to blindly extrapolate what has happened in the past into the future, as the risks and rewards of any investment (including property) are not based on what happened yesterday but on the returns that investment will make for you in the future.
If you’re looking at purchasing a property as your main residence, especially if it is your first home, there are certainly some decent benefits available at the moment including:
- Your main residence is not subject to capital gains tax. This means that versus any other investment you make (shares, superannuation, investment property, etc) your main residence is already receiving a head start as any capital gain you make on your main residence goes straight into your pocket.
- Interest rates are extremely low which makes buying a property more affordable. You do need to ensure however that you stress test you ability to service the loan (pay back the bank) at a higher rate than today as in 5 or 10 years time interest rates might be higher than they are today. The affordability shouldn’t mean that you spend more than you otherwise would have, just that you can pay it off quicker!
- Property prices have pulled back / come off their highs so finding that dream home or first house might be easier now than it was six months ago. With the current turmoil COVID-19 is causing it might also be driving other buyers from the market (volumes are down a lot depending upon which state you are looking) so this puts more bargaining power in your hands vs the seller.
- Most States are offering a range of incentives to encourage first home buyers. Queensland currently has a first home owners grant of $15,000 as well as the first home concession for transfer duty which can save you up to $15,925 (conditions do apply to both these schemes so please check with your accountant, conveyancer or Queensland Government).
At the end of the day you must ensure that whatever you invest in matches your risk profile, investment time frame and fits in with your overall investment plan. Owning property is a long term investment as the costs of acquisition (transfer duty) and disposal (commission, tax if the property is not your main residence, advertising, legal fees etc) are significant and your investment is likely to be underwater in the early years while you wait for the capital appreciation of the property.
As with any investment do your own research!
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