Young people looking to purchase a home will be watching the market for the best time to buy. (Pexels)
You might have jumped for joy when you heard house prices were falling by $1,000 a week in Sydney and Melbourne.
That means sellers are under pressure, and now’s the time to dust off that deposit you’ve been diligently saving, right?
Not so fast. While analysts say the tide has turned and we’re now entering a “buyer’s market”, many young people may not see the benefits just yet.
Let’s look at what a buyer’s market actually is
The term “buyer’s market” refers to when buyers have more power in the housing market.
That’s usually when there are more houses for sale than there are people willing and able to buy them, giving the buyer the upper hand when negotiating the final price for a home.
Alternatively, a “seller’s market” is when sellers have more sway and buyers are willing to meet their asking price or even go above, bidding against other buyers.
Louis Christopher, a property analyst from SQM Research, believes we are now “well and truly” in a buyer’s market.
“The market started to change about midway 2017 for Sydney and from about December 2017 for Melbourne,” he said.
“Before then it was a very strong seller’s market, with many more buyers than sellers. But then the market started to change and progressively it became a situation where there were more sellers than buyers, putting downward pressure on prices.”
But that doesn’t necessarily mean it’s a great time to buy…
House prices are falling, but analysts expect they will fall much further.
Earlier this week, AMP’s chief economist Shane Oliver told 7.30 he believed prices would continue to fall for another two years.
“At the moment it’s quite controlled, quite gradual. It looks quite healthy but by the same token, we’ve got a lot further to go yet in Sydney and Melbourne,” he said.
“My estimate is that they are going to come off 20 per cent from their high point last year to their low point sometime around 2020.”
Mr Christopher agreed, saying it was hard to see the market turning around any time soon.
“Our view is that for 2019, it’s likely prices will keep falling in Sydney and Melbourne,” he said.
So he said buyers were advised to consider their options.
“Buyers need to be careful that they do not overpay in this market, because if prices do keep falling they could face a situation of being in negative equity,” he said.
Then there’s the banks to consider
The banking royal commission has put pressure on the banks to be more responsible when lending money to prospective home buyers.
They are now doing more checks to make sure borrowers can really afford to repay their home loan, even if interest rates start rising.
As a result, it is now harder to get a loan in Australia than it has been for years, especially for young people who are more likely to have smaller deposits.
So, while the power may be shifting in your favour, it may not be any easier for you to secure a home loan. And it could get even harder.
“Our view is the restrictions we’ve seen in the lending markets will stay next year. Potentially there could be further restrictions,” Mr Christopher said.
So is anyone benefitting from these falling house prices?
Deloitte says this is the “house price fall we had to have”.
“Our house prices here in Australia had streaked past anything sensible by way of valuation,” partner Chris Richardson said.
“Now, finally gravity has caught up with that stupidity and prices are falling.”
But Mr Christopher said he believed buyers didn’t need to rush.
“While it’s a buyer’s market, buyers certainly do not need to rush into buying. There’s plenty of time and the market is not about to suddenly change,” he said.