House buying trick everyone’s ignoring – and it could save you $122,000

Quiet achievers are doing one thing in the property market right now – and this move is saving them a potential $122,000 on their dream home.

The property market has been battered over the last year off the back of 10 consecutive RBA interest rate rises, with the average Sydney property declining in value by $122,741 over the last 12 months.

Today, there’s a lot of talk about the potential for a property crash, but at the same time we’re seeing some investors piling back into the market to take advantage of the softer conditions – and property values are again on the rise.

A few months ago I wrote about how even at 5 per cent interest rates, owning an investment property will still make you more than $40,000 every year, but the fear of making a costly mistake still has many would-be property buyers paralysed.

So, is now a good time to buy property?

State of the market

The last year has been a tough one for the property market, with values going down in the Sydney and Melbourne almost every month as the RBA cranked up interest rates to combat the inflation crisis.

As a result, most property buyers and sellers pulled back from the market, with buyers worried about the future and sellers not wanting to accept a lower price for their properties.

But as people have come to terms with our new reality, and as everyone realised the crash was less likely, property market activity has increased over the last few months – and property values have increased along with it.

A property crash is looking increasingly less likely.

As a result, since December 2022 we’ve seen property clearance rates, i.e. the number of properties actually selling on the market increase. Clearance rates are up from 58 per cent in December 2022 to over 72 per cent today, reflecting an increase of over 25 per cent in the proportion of properties selling. This has coincided with us getting towards the end of the RBA rate cycle.

As a result, we’ve seen the average property value Australia wide again increasing, up 0.8 per cent in March, with Sydney leading the charge with property values up 1.4 per cent. Based on the median Sydney property price of $1,014,393, this reflects an increase of over $14,000 in the value of an average property in just one month.

There’s still some uncertainty ahead for the property market, but increasingly property investors are realising that now might be their moment to take advantage of the current market conditions to make their next smart property move.

How to make smart property moves in the current market

There’s a stack of opportunity in the property market today for investors that are smart with their approach. But there are also a few things you should keep in mind when planning your next property move if you want to manage risk and give yourself the best chance of success.

Think long term

Property buyers can go seriously wrong if they take a short term view of the property market. Particularly when the market is soft – apart from causing higher stress levels, thinking short term can lead you to making reactive decisions that cost you money.

Buying a house isn’t a get-rich-quick scheme.

When you buy property, you should know that it’s a long-term investment. Even good properties will go down in value when the market softens. But so long as you have a good property and hold for the long term, history shows us that markets will continue to increase.

Keep this in mind both when you’re buying a property, and once you’re invested. This way you’ll have more peace of mind and get better financial upside from your property.

Run your numbers

With any long term investment, it’s crucial you’re never forced to sell your property at the wrong time. Also specifically when it comes to property, it’s important you can afford to hold your property and live the lifestyle you want.

The key to making this happen is planning smart around the cashflow of your property before you buy. Take the time to make sure your property fits not just with your financial situation today, but also think ahead to make sure your property will fit with your future financial position.

Forecast ahead for the lifestyle you want.

Starting a family, changing jobs or careers, starting a business, are all things that will change your position and impact how a property fits into your finances.

To avoid nasty surprises down the track, take the time to get clear on this asap. If you’re not strong with numbers, or if your situation is complex, think about getting some good advice to help you here. With average property values around $1m, setting up the best strategy for you here will be valuable – and definitely worth the investment of time and/or money.

Manage your risk

Risk is ultimately a good thing when you invest, because it’s what makes you money – and every investment has risk attached to it. Buying property has risks, as does shares, and even saving in cash has risks – the key here is understanding risks and only choosing the risks that are right for you.

If you want to get good results from your property purchase, it’s crucial your risk is managed well. The three biggest risk areas come around choosing a good property, making sure you’re mortgage payments are covered (even when rates are rising), and protecting your income through insurance.

Any time you invest, take the time to revisit your risk management plan to make sure you don’t get caught out by something unexpected.

The wrap

In Australia we love property. Buying property, owning property, and talking about property. We also love talking about the potential for a massive property market crash – but history shows us that this just doesn’t seem to eventuate.

While some corners of the market are talking about the world ending, there’s a group of quiet achievers getting on with business and taking advantage of the property market conditions to set up their future.

Property isn’t for everyone, but if it’s part of your future you’ll benefit from making smart moves today.

Ben Nash is a finance expert commentator, financial adviser and founder of Pivot Wealth, the creator of the Smart Money Accelerator, author of Replace your salary by Investing and host of the Mo Money podcast. He runs regular free online money education event which you can book here

Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstances before acting on it, and where appropriate, seek professional advice from a finance professional