A cooler market can spell opportunity for upgraders

January 29, 2016
Phil Wheatley

If you’ve been sitting on the sidelines waiting for the property market to take a breather, now could be the time to kick-start your plans for an upgrade.

If 2015 was a year of runaway price growth, 2016 looks like being a period of more sustainable value growth.  That’s good news for home owners who are thinking about upgrading to a second or subsequent home.

Enjoy more bang for your buck

The latest figures from CoreData confirm that in the final quarter of 2015, property prices fell by 2.3% across Sydney as a whole. It’s certainly not a sign the market is about to crash. Far from it. But for today’s home owners, upgrading in the current cooler market can mean enjoying a lot more bang for your buck.

Let me explain how this works with a simple example.

We’ll assume Bill has a home worth $700,000. He would like to upgrade and has seen an ideal property with a price tag of $1.5m.  This means the upgrade will cost him about $800,000.

Now let’s say the market dips by 5% - and remember this is a hypothetical example only. If this happened, Bill’s current home would be worth $665,000, so it can seem like Bill has taken a major financial hit.

But here’s the thing. The property Bill has his eyes on has also copped a 5% price fall, and it would now be worth $1.425 million. This means the cost of upgrading has dropped to $760,000 – a saving of $40,000 that goes straight into Bill’s pocket. In short, because Bill is climbing up the property ladder, price falls have worked in his favour.

Rates remain at record lows

Of course, real life is more complicated. A key difference is that values rarely fall by the same percentage across the price spectrum. Different shifts in values can also be seen across differing suburbs.

Nonetheless, this doesn’t change the overriding point that a cooler market represents an opportunity for upgraders enjoy some of the best value buying seen in years. The key is always to buy into an area that offers an abundance of amenities and a quality lifestyle, which will underpin long term value growth.

As an added plus, interest rates remain at super low levels, and in a highly competitive loan market, lenders are keen for your business.

Call me today

If you’re uncertain about upgrading, call me - Phil Wheatley at Mortgage Choice Menai, on 0431 415 311 and we can work through some numbers. Or drop into my office at Suite 2, Level 1 Bangor Shopping Centre, Cnr Menai & Yala Roads, Bangor. I can help you find the right home loan for your upgrade, letting you concentrate on finding your ideal next home.   

Posted in: Home loans

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