Three tips for buying in a fluctuating property market

In Australia’s major capital cities, we are used to the property market rising and rising. It’s one of the reasons we are all so keen to have a piece of it. This latest price correction has made everyone a bit nervous, but that certainly doesn’t mean now is not a good time to buy.

Prices are the lowest they have been for a couple of years, so your first purchase is now more attainable. It just means that you need to be smart in the way you go about it. Property heavyweights, including forecasters BIS Oxford Economics, are predicting the market could remain in slowdown for the coming year – a sentiment echoed by the big four banks. It’s hard to say when the market will stabilise, making it difficult, particularly for those inexperienced in buying property.

So, if you are considering buying an apartment, we offer three strategies to help you get to that first step on the ladder.

1. Don’t stretch yourself too much

When you buy off the plan, you lock in the purchase price at the current market value. In a rising market, this is fine, because your apartment may be worth more when it comes time to settle in a year or maybe more. If the market is falling, your apartment may be worth less at settlement and it’s up to you, not your lender, to make up the shortfall. Your lender won’t lend more than the property is worth.

Your best friend here is a buffer fund. Put away as much as you can in the time between signing the contract, and settlement. If it happens that you don’t need the money to cover the gap, you will have a significant amount to put towards the mortgage immediately – or to use for fun things like furnishings.

2. Buy a place you will want to live in for a while

The market is always kindest to those who buy for the medium or long term. Buying with short-term gain in mind is a sure-fire way to get caught out. Markets rise and fall in the short-term, but invariably rise over a longer period.

An absolute minimum of five years is recommended; seven to 10 is much better. As well as capital gain, you will also want to recoup the costs of buying the property initially and, most likely, you will want this property to fund the costs associated with purchasing the next one.

Don’t just consider your first property to be a stepping stone – enjoy it. Make sure the location suits your lifestyle and decorate it so that you love living there.

3. Be prepared to negotiate

Apartment buyers are now in a good position to get excellent value for money. Developers are feeling the squeeze and many are prepared to sweeten the deal. You may be able to negotiate on the price or inclusions.

Check out incentives offered by developers. Some are offering significant amounts towards the deposit. Some are prepared to take five per cent deposit now and five per cent later, or staggered deposit payments of 2.5 per cent. This means that you can invest the balance of your deposit and receive the interest it accrues. In the past, some developers have offered cars and Vespas.

Although off the plan apartments have a set price, developers may be prepared to negotiate early in the selling period. Their bank is keen to see signed contracts and they are keen to get the project up and running.

If you can’t get any satisfaction negotiating on price, ask about upgrades and inclusions. Most developers sell upgrade packages that include higher quality fittings and fixtures and may be prepared to include these at the base price.