Beating Melbourne’s Surging Property Prices
Buy Property in Melbourne
Despite the ongoing reference to a bursting bubble, house prices in Melbourne continue to thrive. This is fantastic for those who have already entered the market, however for those who haven’t, it may seem like the concept of buying property is simply out of reach. During the September quarter, the median house price across Melbourne increased by 3.2% to $740,000 according to the REIV. In addition, there was a clearance rate of nearly 80% which is the highest number seen in 7 years.
These figures may appear to be alarming if you want to enter the market, however taking the plunge sooner rather than later is a common ethos that still applies. This issue and these trending numbers have been a regular conversation point for many years now. Waiting for prices to drop without evidence to prove this will happen, can mean the opportunity to purchase will be missed and therefore property ownership may simply become out of reach.
With thousands of properties available across Victoria, finding something that is suitable for you and identifying how long you hold on to the property provides a number of advantages over trying to time when you enter the marketplace.
Time in the market is more important than timing the market.
There are a number of things you can do to save money when buying property in Melbourne. Here are some tips to help you.
1. Research, Research, Research.
Understanding the market into which you are buying is one of the most important things you can do. Aim to eradicate emotions and put your logical and diligent cap on. Being armed with market knowledge allows you to make clear and informed decisions, providing you with the best financial outcome. For assistance with research, use a licensed and experience buyer’s agent in Melbourne.
2. Save More for Your Deposit
Banks may offer you a loan based on a 10% deposit, however this often requires you to take out Lenders Mortgage Insurance which is not cheap and can certainly add up over time. Saving for a deposit of 20% or more, will help you avoid Lenders Mortgage Insurance (LMI). Plus it will open up the opportunity for you to negotiate a lower interest rate with your lender. Weigh this up however with the time it will take you to save the extra deposit versus the rate at which the market is rising. If the market is moving faster than your saving capacity, it may be better to pay the LMI.
3. Get a Guarantee for Your Loan
If you don’t have an adequate deposit, consider obtaining a debt guarantee from a family member. Again, this will help you avoid fees and offer an opportunity to negotiate a better interest rate, however they need to fully understand the risk implications attached to becoming guarantor on your loan. .
4. Go Interest Rate Shopping & Find the Best Deal
As interest rates are currently at near record lows, shopping around for the best rate and terms offers a significant opportunity. Mortgage lenders are operating in a highly competitive marketplace and are therefore offering some great deals. A Mortgage Broker can help you save time and money here.
5. Select a Neighboring Suburb
Depending on whether you’re buying to invest or buying to live, keep an open mind when reviewing the location. Selecting a neighbouring and more affordable suburb near a popular area to buy a property in Melbourne could offer more opportunities at a lower cost, whilst maintaining some growth potential. As always, ensure you do your research in all areas you’re considering.
6. Obtain an Independent Valuation
We’ve all heard the term ‘under-quoting’. It’s a serious concern in the Melbourne real estate market. You may have seen a property is listed for $700,000 and ends up selling at auction for $850,000+. Getting a sworn valuation done independently is one way to understand what the property is really worth and helps minimize the risk of overpaying. Note that a valuation and market forces on auction day can be two very different things however, so while this can help, use it as a guide only.
7. Engage with Professionals
Buying property is a complicated exercise, especially if it’s your first time. Surrounding yourself with experts who are independent can help you sift through all the requirements including the points we’ve outlined above and the legalities. These include:
- Licensed Buyer’s Agents / Buyer’s Advocates
- Mortgage Brokers
- Property Managers
8. Get Yourself a Housemate or use Airbnb
If you’ve purchased a property to live in, consider renting out a spare room. This will help with mortgage repayments and reduce the cost of bills. A permanent housemate will offer stability and regular income however many Melbournians are also utilising the opportunities offered buy services such as Airbnb. With Airbnb, you have the opportunity to have temporary guests at times that are suitable for you. You may not get the stability that comes with a housemate, however you will be able to charge a higher nightly rate and regularly meet new people!
Note that this is deemed assessable income by the ATO, so keep accurate tax records!
For more information on buying property in Melbourne, get in touch with our friendly team of buyer’s agents today.