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What the drop in housing prices means for first-home buyers

December 11, 2018 10:00 am by Upside

First home buyers rejoice: after decades of a booming housing market, Australian house prices have fallen over 4.6% in the last 12 months. While these figures are concerning for sellers and investors, for many new home buyers it’s welcome news, signalling a long-awaited opportunity to finally enter the housing market.

So, is now the best time to buy a house in Sydney and Melbourne?

Here’s what the house price drop means for you.

The house price crash in Australia: breaking down the numbers

According to the latest data released by CoreLogic, Sydney’s house prices have dropped by 7.4% in 2018, making it the highest annual drop in 28 years. Melbourne’s house prices have also fallen 4.7% annually, while Perth and Darwin have decreased 3.3% and 2.9% respectively.

While Australia’s other capital cities have remained flat or increased, Sydney and Melbourne’s property market makes up over 60% of the total value of the market, bringing the overall annual drop close to 5%.

The Sydney and Melbourne property market crash is mainly a result of the Reserve Bank of Australia’s crackdown on regulation around lending standards, tighter lending criteria from banks after the launch of the Royal Commission at the end of 2017, as well as a boom of new housing construction projects being completed.

According to CoreLogic’s Head of Research, Tim Lawless, “It’s clear that tighter credit availability is acting as a drag on housing demand and impacting adversely on the performance of housing values across most areas of the country.”

Should first home buyers buy now or wait for property prices to fall?

For any new home buyer, there’s always the looming question: is now the right time to buy, or should you wait in case prices drop even more? While you can never know for sure, all signs point to it being a prime moment to buy.

Property prices are expected to continue dropping in Sydney and Melbourne over the next three years and interest rates are low - making it a golden opportunity for new home buyers to get into the market.

QBE predicts that house and unit prices will continue to fall from 2019-2021, with the median house price dropping by 1.2% in Sydney and 2.5% in Melbourne, with unit prices dropping 3.1% in Sydney and 2.1% in Melbourne. For other capital cities, it’s expected that prices will continue their upward surge, except for Brisbane and Darwin where unit prices will fall by nearly 5%.

On top of this, the RBA has kept interest rates low at 1.5% for the past 27 months, and it’s expected that these rates won’t change until some time in 2019.

As property prices dip, first home buyers in Sydney are flooding back into the market, with a massive 74 per cent increase on first home buyer lending over the last year. Nationally, lending to first home owners has increased almost 30%.

In short, now is a great time for first home buyers to finally take the leap and buy real estate. However, buying your first property can be daunting – that’s why it’s important to do your research, and stay up-to-date with the latest market trends.

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