When is a good time to buy a house in Australia?

After all, a house isn't a cheap purchase, and most people buying real estate probably hope their property will be worth more than what they bought it for when the time comes to sell it.

It's often said that to give yourself the best chance of making a profit, you need to buy at the right time.

More than just making a profit, however, buying property when you're not ready can be disastrous. The 'right time' according to the market simply mightn't be the right time for you to purchase.

So, how do you know if you're ready to enter into what could be the biggest investment of your life? And if you're sure, when is the right time to bite the bullet?

Let's jump in.

How to know if you're ready to enter the property market

Purchasing a house (or a townhouse, apartment, villa, or land) is a big deal.

These assets typically come with a price tag of several hundred thousand dollars - if not more. And that's before you consider the ongoing costs and other associated risks.

Many people, particularly first-time buyers, take out a home loan to get onto the property ladder. However, if they later can't meet their home loan repayments, their lender can repossess their asset.

Even those who do everything right might find that, when it comes time to sell, their property's value has dropped, leaving them in the red. Though, it's worth noting that the property market has historically recovered from downturns, even if it takes time.

Consider WHY you want to buy a house

That said, buying a house is a significant decision, and it's important to carefully consider your reasons for making such a purchase.

For instance, a poor reason to buy might be simply because your friends are doing it or because your parents say you should. It could even be that the market is soaring, and you feel like you'll miss out if you wait.

On the other hand, a good reason might be that you see yourself living in a place for the foreseeable future, or that you've thoroughly researched your investment opportunities and determined that property is where you want to focus your efforts.

Assess if you're ready to purchase

After that, you should think hard on whether you're really ready to enter the property market.

According to Shaun Bond, Frank Finn Professor of Finance at the University of Queensland Business School, you might be in a good position to buy if you've already invested energy and time into your career, have a secure income, and are somewhat ready to 'settle down'.

"Unless real estate is your business … it really is about finding somewhere to live," he told Your Mortgage.

Image: Professor Shaun Bond

"Often, [the best time to buy is] going to come down to a point where there's some stability in your career.

"Generally, for most people, they can get much more economic return from investing in their career … for most of us, being successful at your job will, over the course of your working life, pay off much, much more than a real estate decision ever will.

"You [also] want to be at a point where you have an income that means you can cope with increasing interest rates [or other expenses] if you need to.

Not sure if you can afford a home loan? Try our mortgage repayment calculator to find out

"Probably the riskiest thing about buying is if you have to sell quickly, or if you have to sell unexpectedly, at a time where it might not be advantageous to sell.

"So being in a financial position where you have a bit of a buffer … and you can cope with a bit of a shock, whether that's a higher interest rate or that you need to spend some money on the property."

Low rate home loans available now

If you're considering entering the housing market, you might want to check out these low rate mortgage deals:

Important Information and Comparison Rate Warning

What's the best age to buy your first home?

All that might lead to the question: What age should I be when I buy my first home?

Unfortunately, there isn't a straightforward answer. While there's no 'correct' age to buy a house, many Australians enter the market at a similar stage in life, as Professor Bond notes.

"As a young person, unless you have significant financial resources, it's going to be hard to buy straight away in some of the large cities in Australia," he said.

For that reason, most Aussies tend to rent for some, if not most or all, of their twenties, before lifestyle factors steer them into property ownership.

"The factors that really drive most people to buy, two big predictors that we see in academic research, is something like cohabitation - forming their household unit with a partner - and the presence of children.

"Generally, for a lot of younger people, that's not happening until their late twenties or early thirties."

It's also important not to feel deflated when news of a 10-year-old buying an investment property hits headlines, or you learn of an 18-year-old who saved up a house deposit in six months.

"We see stories in the media about young people - maybe they are 24 and have 18 rental properties - and we can't help but feel some level of envy … but they're the exceptions, and that's why they're in the media," Professor Bond said.

What's a market cycle and which is best to buy in?

So, you've determined you're buying a house for the right reasons and that you're ready to take on the responsibility of homeownership.

Now you might wonder: When is the best time to purchase?

Oftentimes, the best time to buy is when the right property comes up for a price you believe is fair. However, if you're trying to be strategic, you might consider timing your buy to coincide with the market's cycles.

In real estate, there are typically two market stages, a buyer's market and a seller's market:

• Buyer's market
  A buyer's market is one in which there are lots of properties available and fewer buyers looking to purchase them. This tends to ensure competition between buyers is low and sellers are encouraged to give their property an 'edge' - which often translates to a lower price.

• Seller's market
  A seller's market is the opposite. It's one in which there are more buyers than there are properties, meaning buyers are encouraged to compete against one another. This generally results in higher prices.

As the names suggest, most people want to buy in a buyer's market and sell in a seller's market, but that's not always possible. Particularly, if you're selling the property you currently live in and buying another to move to. In such a situation, you'll probably end up selling and buying in the same market cycle.

What market cycle are we in in 2024?

Market cycles are finicky things and can change rapidly without notice.

At the time of writing, most of the country is experiencing a seller's market, Professor Bond said.

"One of the things that we've seen, probably since the pandemic, is a small number of properties on the market," he said.

"When we look at the number of listings over the last couple of years it's well below historical averages, and that's given rise to strong demand but more limited stock.

"It's been a more difficult time for buyers, because there's less to choose from and a large number of buyers are competing for a smaller number of properties."

What time of year is best to buy?

The property market typically picks up around September, when gardens bloom, the school year begins to wind down, and people start thinking about where they'll celebrate the festive season. This period is often busy for real estate, with more properties listed and increased buyer activity.

This strength tends to continue into summer before eventually lulling in winter.

However, markets in different regions might behave differently throughout the year. For instance, the winter market might be stronger in Queensland compared to Victoria, likely due to Queensland's warmer climate. Meanwhile, house hunting in summer could prove challenging in places like Darwin, where the wet season takes over.

The best season to buy will likely depend on your situation and intentions.

If you're planning to move and enrol kids in a new school, spring might be the ideal time to buy so that you can settle in before the school year begins. On the other hand, if you're looking for a bargain, autumn or winter might be your best bet, as the market tends to slow and sellers might get desperate.

Should I wait for interest rates to change before buying?

If you're considering buying a house in 2024, you've likely thought about the interest rate you might face from a bank or lender.

With the Reserve Bank of Australia (RBA) cash rate currently at a 12-year high of 4.35%, interest rates are the highest they've been in years.

It's understandable for potential homeowners to wonder whether they'd be better off waiting for rates to drop before buying.

However, this might not be the best strategy for three key reasons:

1. Australia's home loan market operates differently from those in many other parts of the world. Most Australian mortgage holders opt for variable rate home loans, meaning that someone taking out a 30-year mortgage isn't locked into the initial rate for the life of the loan.
   
   
2. The cash rate may not return to its recent lows for a long time, if ever. Waiting for the cash rate to drop back to its record low of 0.1% - achieved during the pandemic - could lead to disappointment.
   
   
3. Some experts predict that cash rate cuts could drive house prices higher. Currently, many homebuyers' budgets are constrained by their borrowing power, as banks only lend what they believe a borrower can repay. When the cash rate drops, homebuyers may be able to borrow more, which could lead to increased competition and higher property prices.

In summary, if interest rates are the only reason you're hesitating, it might be worth reconsidering your position.

Is the housing market about to crash?

There's a common sentiment among investors in virtually all markets: the next crash is coming. Markets tend to move in waves, and every now and again a 'wave' will crash onto the shore and smash the value of investments.

While it's almost certain the housing market (like all markets) will experience a downturn at some point, predicting the timing and severity of such a drop is nearly impossible.

Additionally, there's no shortage of pessimists who warn that Australia is in the midst of a 'property bubble' that's destined to burst.

Whether this is true or not remains to be seen, but most experts agree that a dramatic collapse appears unlikely.

"Obviously, we know that post-pandemic, the market has performed very strongly, and I think anyone buying today needs to be aware that the recent past performance is unlikely to be repeated," Professor Bond said.

"Having said that, generally speaking for most Australian cities, the fundamentals that drive real estate prices are generally very positive … we're not building enough [new housing], and we've seen a strong inflow of population into many of our popular areas.

"This increasing-demand-slow-responsive-supply [dynamic] means that, certainly for the foreseeable future, I think the fundamentals look positive for real estate.

"But we don't have a crystal ball and we don't know what adverse events could happen in the future."

Remember: It's not all about money

Perhaps the most crucial indicator that it's a good time to buy is when you're personally ready and find a place you love.

By now, you're likely aware that markets can be unpredictable. If you purchase just before a property market correction, you might find yourself 'stuck' owning your home for longer than planned, or worse, forced to sell at a loss.

That's why it's essential to buy a property you're happy to hold - and live in, if it's your residence - for several years at least.

Make sure the neighbourhood fits your lifestyle, the house meets your needs, and you can comfortably afford the repayments in the years to come.

_{Image by Bailey Rytenskild on Unsplash}