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Is now the right time to buy a property in Australia considering the recent drop in property prices?

In Australia, house prices always generate considerable interest. Until recently, it was all about skyrocketing prices and steadily deteriorating affordability as prices ballooned. However, the focus has shifted to the looming slowdown brought on by rising interest rates. Experts expect that home prices in Sydney and Melbourne will fall this year, while national prices will stabilise. Capital city prices could fall by up to 15% over the next two years, although it is too early to determine whether this downward trend would be sustained.

The current market situation

National average home prices increased 22 per cent last year, the fastest 12-month increase since 1989, fueled by record-low mortgage rates, home buyer incentives, a coronavirus-driven shift in spending to “goods” like property, recovery from the lockdowns, a supply shortage, and a fear of missing out.

Monthly capital city and national price rise, on the other hand, peaked at 2.8 per cent in March last year and has trended down to just 0.3 per cent in March this year. Since March of last year, Sydney and Melbourne have been leading the slowing trend, with both cities currently experiencing price declines.

According to the most recent data, nearly two out of every five Sydney suburbs had their property values decline in the first three months of 2022. According to the Australian Financial Review, home prices have decreased in 189 suburbs while unit prices have decreased in 165 suburbs. Almost half of all suburbs in Melbourne have also seen a decrease in value. House prices fell in 154 suburbs, while unit prices fell in 149 suburbs.

However, Brisbane and Adelaide continue to have substantial price growth, with Brisbane benefiting from strong interstate migration with these cities experiencing fewer affordability constraints and very few listings. Perth’s growth is accelerating, aided by the reopening of the city to neighbouring states. Additionally, regional price increase remains robust. In comparison, Brisbane’s housing market saw an increase in unit values across the board during the same period, with only one area experiencing a fall in unit values. And the pattern was similar in Adelaide, with all house values increasing and only two suburbs experiencing a decline in unit values.

Is today the best time to invest in real estate?

First-time buyers, investors, and upgraders may be closely monitoring housing market news, waiting for the optimal time to strike. There are a few external elements to consider that could affect your “perfect” time to acquire real estate.

Property prices on a national average are projected to peak around mid-year and then undergo a cyclical downturn. The values have already begun to decline and there is a possibility that they will continue to do so. After a 22% increase in national average home prices last year, average home price growth is likely to slow to roughly 1% this year, and banking experts anticipate a 5-10% fall in average home prices in 2023. From top to bottom, prices are anticipated to fall by roughly 10% to 15% through 2024, returning average prices to March/April levels last year.

Numerous analysts expect that housing values will fall by up to 10% in 2022, particularly if and when the Reserve Bank of Australia raises the cash rate, as forecasted. Home loan lenders should promptly boost variable interest rates in response to a cash rate increase, exerting additional downward pressure on property prices.

Additionally, for some time now, the skyrocketing value of properties in Australia’s big cities and regional locations has exceeded income growth. Purchasing a property has grown increasingly costly, particularly for young Australians. At some point, this financial burden will result in a decline in demand, which will likely result in additional home price reductions.

However, it’s worth noting that it’s difficult to forecast the bottom of any market or to pinpoint the “ideal” period to acquire real estate. For those considering purchasing property now, it could hinge on savings – specifically, if savings can keep up with the rate of inflation we’re experiencing. However, purchasing opportunities have undoubtedly improved. Additional fresh listings have been added to the market and prices are beginning to ease in capital cities. Thus, it is highly situational.