Is now the time to buy your next home?

With significant growth in Sydney and Melbourne house prices, if you bought your home five or more years ago there’s a good chance you’re sitting on some decent equity. And with interest rates at an all time low, now’s a good time to refinance.

Investing in your own home is a strategy that has paid off for many Australians, with property prices up 90.2% in Sydney and 73.7% in Melbourne since January 2009. Today, just over half of all household wealth in Australia today is held in housing1.

So how can you make the most of these factors if you’re thinking about selling, and moving into your next home?

When’s the best time to buy?

The barbecue stopper question right now is whether prices in Sydney and Melbourne have peaked.

"Growth in these markets is expected to slow over the second half of this year and into 2017 as stock levels rise," says Cameron Kusher, CoreLogic’s Head of Research. "Brisbane and Hobart are likely to see a pick up in growth, while Perth and Darwin are still in decline."

He says Adelaide is still uncertain, as car plant closures impact the local economy, and Canberra’s projected growth is moderate at best.

In addition, average discounting rates and selling times are moving higher, making this a good time to be house hunting. Of course, it all depends on the local market you’re looking in.

The average time on market in Melbourne is 36 days, and 40 in Sydney – compared with 88 in Darwin. But Sydney and Melbourne vendors are also discounting by 5.4% on average1.

And when’s the best time to sell?

New listings are also lower than they were a year ago, with new listings in Sydney down 20.3% compared with August 2015. So there may be less competition for buyers.

Unless you’re selling a unit in an area where new developments have just come online. "There is a lot of unit stock coming on in Melbourne and some parts of Sydney," says Kusher.

He advises it’s always better to sell first if you can. "Bridging finance can be stressful and expensive, especially if it takes longer to sell than you expect. Long selling periods are not necessarily a bad thing if you can afford to wait, as the right buyer may end up offering a better price."

What’s on your home wishlist?

Timing the market is much less important than finding a home you can comfortably live in for years to come – because moving can be an expensive process. Stamp duty, conveyancing and pest reports all add to the cost of buying, while you can expect to spend between 2 and 3.3% on property agent fees when you sell2.

"It all depends on what stage of life you’re at," comments Kusher. "Many people put weight on local school zones, the time it takes to travel to work and local shopping options. If you’re looking for good resale value demand is currently strongest closest to the city centres."

Growth in Sydney and Melbourne is expected to slow over the second half of this year and into 2017 as stock levels rise.

The lifestyle alternative

If you’re looking for a more affordable option outside the Sydney and Melbourne inner city ring, Kusher suggests checking out the adjacent coastal or lifestyle areas as an alternative to the city’s outer suburbs.

"If you work in the CBD, Wollongong, the Central Coast, Bendigo and Geelong are all within an hour by train. You could spend more time than that driving from Western Sydney into the city."

He says housing market conditions are improving in these key coastal markets. "Loss making resales are down to 2.3% in the lllawarra and Newcastle regions, which is on par with Sydney."

With median house prices around $740,000 in Wollongong3, $637,000 in Gosford4 and $607,000 in Geelong5, your borrowing power may go a little further outside the main capitals. But it’s important to make sure you feel at home in the local community before making the leap – it may be harder to get back into the capital city market once you move out.

Think long term

Most importantly, be clear about what you can afford. It’s easy to get caught up in the emotion, and with the cost of borrowing so low it’s also easy to believe repayments on a more expensive property will be sustainable.

However, a 20 to 30 year mortgage is a long term commitment and there is every chance rates will go up again at some point.

Smart homeowners are making the most of low interest rates now by paying more than the minimum into an offset account. Not only will you save years off your loan, you’ll build up a buffer.

Whether you’re upgrading and downsizing, there’s never really a good or bad time to buy a new property. The key is to be organised: know what you want, what you can afford – and arrange pre-financing approval so you can make a confident offer when you find your perfect new home.

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