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Opportunities in a falling property market

After several years of exponential growth, Australian housing prices are on the downturn causing a falling property market. CoreLogic’s national index demonstrated dwellings within Melbourne and Sydney dropping by 3.3% and 3.5% respectively. This downturn is attributed to tighter lending standards, reduction in property investors and larger capital requirements enforced on Australian banks.

Property owners will see this downturn as a negative, however there is always opportunity in this market for the right buyers.

First Home Buyers (FHBs)

The recent housing market drop has been a favourable shift for first home buyers looking to get in to the market. With accelerated growth and the market previously being in the seller’s favour due to large competition and demand, recent events have enabled FHBs to get a foot in the door. Previous record high clearance rates that have priced FHBs out of the market have now fallen which has in turn reduced the pressure on this demographic. Furthermore, the tightening of lending to investors has significantly reduced competition in the entry level price point of the market.

In short, lower prices and less competition puts the FHB back in the strong seat.

Next Home Buyers

With record high purchasing prices previously restraining buyers upgrading to their next house, a steady reduction in property prices enables this buyer to take the next step now. A property once driven out of your price range may very well be achievable for next-home buyers as the market backs off.

The challenge is all around timing. If you are planning to upgrade, then you will most likely need to sell your current home to do so. If you sell for what you think is 5% less than what you may have achieved 6-12 months ago, this is fine as long as you get the same ‘discount’ on the new purchase. As you are moving up the property ladder, this 5% loss will be outweighed by the 5% gain on the next purchase. In other words, what you lose by selling in a down market you will make up when you buy in the same market.

Competitive Lending Options

With less transactions happening in the market, lenders have turned their focus to trying to attract those with an existing loan. Lenders are offering various bonuses and rebates to those who are willing to take the time to refinance. These incentives range from ‘cash-back’ offers of up to $2,000 or very competitive interest rates. It has never been a better time to review your lending



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