Buying your first home in a falling market

Buying your first home is one of life’s major milestones, but what should you do if you’re ready to get into the market and property prices are falling?

Conscious that you don’t want to see the value of your first home drop straight after you’ve been handed the keys, some first home buyers may continue renting or living with their parents until the market improves.

However, it’s understandable if you don’t want to delay your decision. After all, you might be getting married or starting a family and want a place to call your own, or maybe you’ve just had enough of the rental or parental life.

Whatever your reason, real estate agent Rafi Younes says there are some tips that first home buyers can keep in mind to reduce the chances of losing money on their property.

Rafi’s top tips

  • Look at property price changes on a suburb level
  • Avoid over-supplied areas
  • Buy a property that will suit you for 7-10 years
  • Make the most of market conditions
  • Buy the suburb, not the home.

1. Dig a little deeper

Rafi says that most news websites only report on property price changes at a capital-city level, however first home buyers need to understand that there are actually many smaller markets within that.

He said if property prices are falling in a particular capital city, this is not necessarily reflective of what’s happening in every suburb as some areas might be dropping in value, while others might be steady or even increasing in value. Rafi recommends that first home buyers look at markets on a suburb level to get a better gauge of what’s happening with property values in those specific areas.

2. Avoid over-supplied areas

Property price changes are driven by supply and demand. Prices will fall if there is more supply than demand, and vice versa. In falling property markets, Rafi recommends that first home buyers should avoid over-supplied areas where there’s a lot of similar properties, and new properties can be easily built.

He says that these areas typically include inner-city apartments and house-and-land packages on the city outskirts, where developers build 100-plus apartment complexes or create 100-lot housing estates. In a falling market, seller’s in these areas may have to lower their asking prices because there are so many similar houses for sale. This means that if you own a nearby property, its value is likely to drop also, he says.

3. Buy for the next decade

Given that property markets are typically cyclical, Rafi recommends that first home buyers take a long-term view and look at properties that will suit them for the next 7-10 years. He says this could help buyers minimise the risks of making a loss when buying a property in a falling market because the market may have recovered by the time they’re ready to sell.

4. Take advantage of a buyer’s market

Rafi says there can be benefits to buying your first home in a falling property market. He says that there are typically fewer buyers in a falling market, meaning less competition for you. This means that those who are buying a home may be able to negotiate a cheaper price and include special conditions and clauses into their contracts, he says.

5. Buy the suburb, not the home

Rafi says that buyers should consider locations that will have stronger buyer demand, regardless of whether prices are going up or down. He recommends locations that have good access to transport links, such as train stations and tram stops, and that allow easy access to major employment hubs, such as city CBDs.

He also says that first home buyers should consider the lifestyle offerings of suburbs, including the proximity of parks, cafes, supermarkets and schools. These types of features will typically attract stronger buyer demand as they provide easy access to work but also the recreational benefits people like to enjoy in their spare time.

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Things you should know

The information contained in this article is of a general nature and is not intended to be nor should it be considered as professional advice. You should not act on the basis of anything contained in this article without first obtaining specific professional advice. To the extent permitted by law, Bankwest, a division of Commonwealth Bank of Australia ABN 48123123124 AFSL / Australian credit licence 234945, its related bodies corporate, employees and contractors accepts no liability or responsibility to any persons for any loss which may be incurred or suffered as a result of acting on or refraining from acting as a result of anything contained in this article.