For most Australians, owning property is high on life’s list of priorities, but when is the right stage to take the plunge?
Michelle May, a Sydney-based property flipper-turned-buyers’ agent, says it all comes down to personal circumstance. She says there’s no perfect time to buy a property and no such thing as being too young or old.
“I recently met 80-year-old clients who wanted to go from a townhouse they owned to a one-level apartment. They were fit and healthy and wanted to make sure they could live independently for as long as possible,” she says.
“I bought my first place at 22 and that was the right decision for me, so it really depends on the individual and also on the bank, if they need finance.”
May explains the fundamentals that come into play when deciding when to buy.
A history of a stable, regular income, with the prospect of the same in the future is a must-have.
May says without it, the banks simply won’t lend to you, or (they will, but) at a much higher rate than desirable.
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If the need for stability is rising, buying might be a good idea, May explains.
Having your own place means you can have that purple bathroom you’ve always dreamt of. When you’re a tenant, you are at the behest of the landlord, who may up the rent regularly, stop you from making changes and also turf you when it suits them, May says.
The imminent arrival of children can have a big impact on buying desire. “(It’s about) the need to create that family home for their child, where memories are made and pictures are hung on the wall.”
Never choose to buy because of what someone says, which may or may not happen with the market.
“Even the experts cannot agree on what is going to happen and trying to predict the bottom of the market is a waste of time. This is about buying your home,” May says.
“If you are ready to buy, then buy today, as having your own home is a long-term exercise and any short-term rises and dips in the market really don’t matter. If you find the right place, do your research and buy it.”
May says the most important factors for potential buyers to consider are their ability to actually pay a mortgage and a willingness to compromise, which is almost always required.
“Be realistic and honest with your budget; not giving your broker the full picture of your lifestyle habits and expenses will only come back to bite you, as you will end up eating baked beans for the next 20 years. No home ownership is worth that.
“It’s usually the case that your rent can afford you a nicer and bigger place than your mortgage will. This is sometimes a hard pill to swallow for people who first enter the market to buy.”
So, be prepared to concede on some things.
May says the sooner you can get on the property ladder, the better, as it can set you up for life. Her advice is to go at it alone if you are in a stable job and you can perhaps get help from your family.
“Every dollar you sink into your property now will reward you in the future, and while it may sound boring and responsible, if you are a person wanting a family for the future, you will probably never have as much free time or free cash as when you do prior to having kids.
“And even if having a family is not your chosen path, your property can become your retirement fund and allow you to retire earlier. Not a bad thought!” she says.
Be conservative and go for quality rather than quantity.
“If you have to choose between a house on a main road or a townhouse in a quality street, I would choose the townhouse, as they will perform better in terms of capital growth and will give you more options for the future if you decide to upsize,” May says.
Also carefully consider the impact of losing one income if kids are part of the plan.
Being a retiree means borrowing from a bank will be restricted and you will probably only be able to use the money from your last property sale, May advises.
“In which case, I’d say, enjoy it! Buy what you want, but think about the fact that this property needs to also work for you when you are perhaps less mobile,” she says. Think about strata levies too.