By Louisa Sanghera, Director, Zippy Financial
Property prices are predicted to fall over the coming year, but it is always hard to know exactly when they are going to start trending back up again. So, if you are interested in taking advantage of the dip, it could pay to start preparing now.
Earlier this year, Domain’s June 2022 Quarterly House Price report showed national property prices were starting to slightly dip. And ANZ economists are predicting a 15-20% drop by the end of near year, before starting to recover in 2024. Prices never seem to dip for too long!
How can you prepare to take advantage of lower prices if you are in the market to buy? Here are five tips to help you get ahead of the curve.
- Start researching the market now
Think about what you are looking for in a property. Where do you want to live and what features are you looking for? What can you realistically afford?
Then start researching market prices on realestate.com.au or Domain so you can compare similar properties in your preferred locations.
This will give you a benchmark to aim for while you are saving your deposit, and when the times comes, you will be able to tell if the home you have set your eyes on is a great deal or not.
- Keep your tax returns up to date
Having your tax returns ready to roll is a crucial step in the mortgage application process. Before a lender can approve your application, they need to know all about your income and ability to meet repayments.
Your financial picture helps lenders to assess the risk of lending you money and what your borrowing capacity is.
Some accountants have four to six week lead time on completing tax returns, not to mention the time it takes for you to get your paperwork together and get an appointment, so if your tax returns are not up to date, it is best to get onto it now.
- Start reducing unnecessary expenses
Lenders like to see whether you are a splashy spender or a savvy saver. It is all about assessing the risk of lending money.
Go through expenses and see where you can trim. Excessive streaming services, too many takeaway meals, unused memberships etc can add up.
You don’t have to become a full-on minimalist but tweaking your expenses can make you look good to lenders. And the savings you unlock can go towards your deposit.
- Build up a deposit of genuine savings
Now that you have got an idea of market prices, you can work out how much you will need for a deposit. Generally a 20% deposit is regarded as a great savings goal, but there are ways to get into the market with as little as a 5% deposit, such as the federal government’s First Home Guarantee.
Whatever the deposit amount you are aiming for, don’t forget to factor in a little extra to cover purchasing costs such as conveyancing fees, building inspections and stamp duty.
Lenders will look for a portion of your deposit to consist of genuine savings, at least 5% of the purchase price. Some of the more commonly accepted examples of genuine savings are:
- Accumulated funds or regular deposits in a savings account in your name for at least 3 to 6 months
- Term deposit savings accounts held for at least 3 months
- Shares or managed funds held for at least 3 months
- Rental history for the past 6 months
- Assess your borrowing capacity or obtain pre-approval
Knowing your borrowing capacity or getting your finance pre-approved gives you a great insight into your borrowing limit. After all, you likely won’t know what you can afford to buy if you don’t know how much you can borrow. We can help you assess your borrowing capacity or obtain finance pre-approval!
If you have got your eye on buying during the predicted dip over the next year or so, reach out today and we can help you start planning.
Phone: 1300 855 022
Email: clientservices@zippyfinancial.com.au
Disclaimer: This article contains information that is general in nature. It does not consider the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information. This article is not to be used in place of professional advice, whether in business, health or financial.
