Real estate Australia: Move now before it’s too late, homebuyers warned

It could be the right time for this savvy homebuyer move before real estate market conditions shift again, experts say.

Space has become a coveted asset in recent years.

What we want from our homes has shifted and as a result many Australians have made the move and upsized. However, after a boom in property prices during the early pandemic and skyrocketing interest rates, going bigger can feel like a very expensive jump.

But upsizing is still achievable according to experts, especially in flatter market conditions, as long as homeowners do their research and keep their options open.

BENEFITS OF UPSIZING IN THE CURRENT MARKET

Mark Errichiello, director of buyer’s agency Master Advocates, said there is currently an attractive window for anyone looking to upsize.

“We’re in a position where there’s less likelihood of interest rates rising much more. The market is also starting to show signs of stabilising largely due to lack of stock.

Homeowners should consider upsizing now before the market shifts. Picture by Wayne Taylor

There could be an opportunity when buying a larger property that if the market starts to bounce back within the next six months you’ll soon see some equity,” he said, adding it’s inevitable certain sellers will be motivated.

“Some vendors of larger properties may be a little distressed, or at least need to take a fair price,” he said.

“If you’re there in that window when the vendor has to sell, you could be doing them a favour while getting yourself a fair deal to upsize.”

EXPLORING THE OPPORTUNITIES

Buyers on a budget could also reconsider what trade offs they’re willing to take with their next purchase.

“Everyone’s needs and wants list is different, but if there can be some compromises where you look at boundary suburbs of your first choice, or even areas along the same infrastructure line but a few suburbs away, then there are always opportunities to be explored, “ Mr Errichiello said.

Purchasing a “renovator’s delight” has traditionally allowed upsizers to cut costs, but the construction crisis and labour shortages have changed the economies of scale.

“There’s a risk with the variable cost of construction today,” Mr Errichiello said. “Up until a couple of years ago, builders would agree to a fixed price with maybe six months to decide. But now they’ll add variation costs and a renovation can blow out so it’s really something to consider carefully.”

OWNERS WITH AN IMPROVED EQUITY POSITION

Steven Mickenbecker, Canstar’s finance expert, said many upsizers could actually be sitting in an attractive position.

“People in this scenario have usually lived in their house for somewhere between five to 10 years and they’ve worked up some reasonable equity,” he said.

“Banks will look at them favourably because this is the sort of customer they want to lend to. But remember, with interest rates up the income constraint and the affordability of repayments has significantly knocked back how much people can borrow,” he said.

Upsizers are often becoming new borrowers in the eyes of lenders, and Mr Mickenbecker said they should take advantage of the new-found status as a new customer.

“New borrowers are getting better rates than existing borrowers. Most existing customers are paying 30 basis points higher than the average new loan today and if you’ve been in your loan for a long time you’ll probably be paying more. So, it’s a great time to get the best deal you possibly can.”

THE CHANCE TO ‘RESET THE CLOCK’

Mortgage holders with the luxury of time could also minimise home loan repayments temporarily.

“This could also be an opportunity to reset the clock. Let’s say you’re 10 years into a 30-year loan then you can get the repayments down by effectively starting again at 30 years. However, I’d recommend a fair bit of caution because if you’re in your fifties this could become problematic. But even in your thirties ask yourself if you still want have a loan when you’re about to retire.”