6 things to know before buying property in 2023

This year is looking like an ideal time to enter the property market – or expand your portfolio.

So, whether you’re upsizing, downsizing or hunting for the perfect investment opportunity, here are six things to think about when climbing the property ladder in 2023.

With economic uncertainty and rising interest rates, it’s natural to be nervous about making your next property move.

But despite the doom and gloom headlines being splashed in the media, rising interest rates and softening property prices, economists say the year ahead still holds plenty of promise for savvy investors and property buyers.

“This year there has been a bit of an improvement in sentiment,” Anne Flaherty, economist at realestate.com.au says.

“We’ve started to see listing picks up, which shows confidence is returning, and auction clearance rates have increased since last year, which is a sign that selling conditions are improving.”

When the Reserve Bank first started rate hiking, Flaherty says there was enormous uncertainty around how high and how fast they would move, and that shock led a lot of people to hit pause on entering the market. But there are always going to be people looking to buy and sell.

 “People have been hesitant to sell because of economic uncertainty but we know from REA data there is still pretty healthy buyer appetite out there,” she says.

The property market holds a lot of promise for savvy buyers in 2023. Picture: Getty

“The market itself is forecasting that interest rates will be below where they are now within two years and having the end in sight is helping to renew confidence.”

Whether you’re upsizing, downsizing, investing, or relocating, there are still plenty of reasons to invest in real estate in 2023. Here are six things to consider when buying your next property.

1. How much to borrow

While a softening market sounds like good news for property buyers, Flaherty says the extent to which property prices have fallen does not outweigh the gains they’ve experienced over the past few years.

“Prices have fallen less than 10% from their peak,” she says.

“But due to rising interest rates, the average borrowing capacity for homebuyers has reduced by 25%”

Flaherty says it’s important to factor additional costs such as body corporate fees, stamp duty, land tax and even building inspections into your budget so that there are no nasty surprises when it comes time to refinance.

In the initial research stages knowing your borrowing power is crucial, and handy calculator tools can make this step easier.

2. Can I afford other upfront costs?

It’s important to know about the upfront costs that come with buying a home because factoring in costs outside the deposit – such as government taxes – can help avoid unpleasant surprises.

“Stamp duty is one of the largest upfront costs,” General Manager – Home Buying at Bankwest, Peter Bouhlas says.

A critical step in the buying process is knowing your budget. Picture: Getty

“The laws on stamp duty are always subject to change, so it’s a good idea to check your state or territory government’s housing website for the most recent information. Our stamp duty and LMI calculator gives you a good indicator on what your upfront costs might be.”

3. Should I hold off buying and just see what the market does?

Sadly, there’s no such thing as a real estate crystal ball but, with more interest rate hikes on the horizon, Flaherty says there’s a strong possibility we’ll see property prices decline further this year.

“The impact of interest rate rises is continuing to flow onto property prices,” she says.

“We did see significant price drops last year but the rate at which property prices are falling has slowed down.

“Once we see interest rate rises come to an end, we are likely to see an end to the price drops.”

4. Should I sell my home before buying the next one?

It might be risky but sometimes you just have to strike while the market is hot.

While there could be benefits in buying first, such as having the certainty of a roof over your head, there are also detractors, such as taking on multiple mortgages, which might not be financially viable.

“There is always more risk with buying before selling,” Flaherty says.

“That risk comes from not knowing how much money you have to work with.”

If you’re getting ready to buy your next home, you’ll need to work out how much your current property is worth and take out how much is remaining on your home loan, as this will help you set a budget for your new place.

Buying before you sell is a riskier option than selling first. Picture: Getty

“It’s important to understand that if you sell your house for less than the bridging loan, you could end up with a higher home loan balance than you expected,” Bouhlas says.

Before buying your next home it’s key to understand what your repayments could be, and Bankwest’s mortgage repayment calculator can help.

5. Is now a good time to be buying an investment property?

With the record-low rental vacancy rates across the country likely to get even lower, now would seem like the ideal time to invest in a rental property.

Flaherty says the under-supply of rental accommodation is a problem that is not going anywhere anytime soon, which means for investors, there is very low vacancy risk.

“We’re looking down the barrel of increasing rents,” she says.

“If you’re in it for the long term, then you need to be prepared for some fluctuations as an investor. With that in mind, currently things look solid with rental yields performing extraordinarily well, driven by strong demand for rentals and a shortage of good stock on the market.” Bouhlas says.

“One key tip – buying property can be emotional, but as an investor you need to focus on the economics, so make decisions with your head, not your heart!”

6. Should I hold off on selling until the market bounces back?

If the past three years taught us anything, it’s that attempting to predict the future is an unwise game.

“Whether it’s 2023 or any other year, mathematics are the same,” Bouhlas says.

“If you sell for a high price, you’ll likely be buying for a high price, too.”

However, the reverse is true, too.

“The vast majority of people who own a home have done incredibly well over the past couple of years,” Flaherty says.

“If you are selling and buying at the same time then the relative impact will be felt in the price that you sell for.”

This article has been bought to you by Bankwest a division of Commonwealth Bank of Australia (Bankwest) ABN 48 123 123 124 AFSL / Australian credit licence 234945.

source: rea.com.au