Buy now or wait ‘til Post First Home Owners go?

The evidence is in, property prices are on the rise, as I predicted at the start of the year. Demand, due to low interest rates, improved affordability and the First Home Owners (FHO) Scheme’s has lead to a recovery in the price of residential property. Yet the big question is will they been sustainable or will demand drop off post FHO’s? Well there are a few things one needs to take into consideration here before making a call.

# Supply side—Yes demand is up, but how is supply going?
A. Supply is still considerably constrained if you are buying in fully developed area’s closer to the CBD. Plus we all know they can’t make any more land, so I suspect with continued population growth and limited construction taking place the shortage of supply will continue to drive increased values.

# Demand Side—Will investors come into the market in a stronger manner?
A. We are seeing evidence of increase mortgage lending appearing in the RBA data records.  This is a sign of their renewed interest in residential property as their superannuation was battered for the past couple of years and property rental yields hold up and capital values continue to grow

# Interest Rates Affordability?
A. Small increase in rates don’t have too much impact on demand, but quickly implemented increases have a huge impact as scare mongering and sentiment shift to a negative outlook.  This will drive down demand and general interest, but will it actually happen in the next couple of years? One thing I’ve learnt from past experience, I’d be happier competing against a First Home Owner on a budget than competing against an inexperienced investor with more money than sense, as they will pay over the odds more often than not.
I’ll always take a long term view of potential performance, so I’ll continue to buy when I can afford it rather than try and time the market for a great buy.