Australians are being urged to jump into the market while rates are low, however one economist suggests the opposite is a better approach. But what is right for you, and how can you consider timing the market?
With unusually high auction clearance rates and record low interest rates, Australians are, understandably, attempting to jump on the property boat before it sails.
However, chief economist at AMP Capital Shane Oliver explained to Smart Property Investment that he only buys property at the top of the interest rate cycle, and that investors might want to consider the same.
“If you buy at the top of the cycle then the likelihood is that rates will come down – and mortgage repayments will only get easier,” he says of his decision.
Mr Oliver claims that even with the banks taking future rate increases into account, there is no guarantee that a property buyer can maintain a comfortable standard of living while servicing their loan.
“Some people rush in at the low end and are put under financial pressure when rates start climbing.”
While security is one reason to buy high, Mr Oliver also believes that the increased cost of the loan can be offset with a better price for your property.
“Buying in a market with high interest rates gives you more time to think about your purchasing decision because there’s less competition.
“And as all investors know, with less competition there is more power to negotiate for a better price.”
Lower auction clearance rates also allow investors to have more leverage when it comes to negotiating on a property that’s been passed in.
But if investors are determined to buy at the bottom of the market, Mr Oliver suggests they should get a move on.
“We’ve pretty much hit the bottom,” Mr Oliver said of the cash rate. “In 2009 there was a relatively short turnaround before we moved off the bottom of the rate cycle… so it’s likely to see rates start rising in the second half of next year.”
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