{"id":3165,"date":"2022-08-01T07:20:11","date_gmt":"2022-08-01T07:20:11","guid":{"rendered":"https:\/\/royabhishek.in\/urbanbuyer\/no-you-should-not-put-your-property-search-on-hold\/"},"modified":"2022-08-01T07:20:11","modified_gmt":"2022-08-01T07:20:11","slug":"no-you-should-not-put-your-property-search-on-hold","status":"publish","type":"post","link":"https:\/\/royabhishek.in\/urbanbuyer\/no-you-should-not-put-your-property-search-on-hold\/","title":{"rendered":"No, You Should NOT Put Your Property Search on Hold!"},"content":{"rendered":"

[ad_1]
\n<\/p>\n

\n

Are you thinking of putting off the purchase of your new home or your next investment property?<\/p>\n

I know this is a common thought with property investors right now!<\/p>\n

You could be forgiven considering the current financial and economic outlook.<\/p>\n

Interest rates have started rising and while that looks to continue, we are also seeing a spike in inflation.<\/p>\n

Even the Stock Market has seen better days.<\/p>\n

\"Market<\/p>\n

The media has pounced on this uncertainty to pedal more doom and gloom and there is even another financial \u201ccliff\u201d looming.<\/p>\n

Who in their right mind would want to consider investing right now?<\/p>\n

I sit with people every day who are a little uneasy and are considering holding off or stopping their search altogether.<\/p>\n

For some that may be the right call, but for many, I believe it will be the wrong call.<\/p>\n

It all starts by understanding the outcome of your actions, in order for you to make the right decision.<\/p>\n

Here are my thoughts:<\/p>\n

When is the right time?<\/span><\/h2>\n

So, when is and when will be the right time to buy property?<\/p>\n

Almost everyone you speak with is waiting for the \u201cright time\u201d to enter the market.<\/p>\n

They are waiting for a sign, but how will they know?<\/strong><\/p>\n

The analytical might be waiting for data to point them in the right direction, while the emotional want to feel confident.<\/p>\n

The truth is nobody can pick the turning of a property market, so don\u2019t even bother trying.<\/p>\n

Instead, take a long-term approach and instead focus on spending time in the market<\/strong> as opposed to the timing.<\/p>\n

More specifically, time in a market that will give you above average, wealth-producing rates of return.<\/p>\n

With that in mind, the right time to buy is when you are ready.<\/strong><\/p>\n

When you have a secure job, your finance in place, the right structures in place, and a buffer in place to ride out the hard times.<\/p>\n

If this sounds like you, NOW is the right time.<\/p>\n

The events of the next 3-6 months will be forgotten a decade or two down the track.<\/p>\n

\"Unit<\/p>\n

Case study<\/span><\/h2>\n

Let\u2019s use the example of a buyer with a Pre-Approval in place for $800,000 that is valid for 3 months.<\/p>\n

At this point in time, I know this will buy you a great investment-grade asset in our major capital cities.<\/p>\n

Specifically, in Brisbane,<\/a> you can buy a house with this budget, Melbourne<\/a> a Villa Unit in an affluent South-eastern suburb, and Sydney<\/a> an Apartment in a premium suburb.<\/p>\n

\n

While there may be some confusion over the immediate growth prospects, you will be entering a very tight rental market that will tighten with borders re-opening.<\/p>\n

In many cases, this will likely see rental increases offsetting some of the interest rate rises.<\/p>\n

So our \u201cbuyer\u201d is now in the market and can set and forget their great investment acquisition.<\/p>\n

What would it cost the same buyer if they pause their search for 6 months in the hope of finding greater certainty?<\/p>\n

Well firstly, interest rates are likely to be substantially higher when they\u2019re planning by next year.<\/p>\n

This will most likely substantially reduce<\/strong> their borrowing capacity and even if they have $800,000 property drops to $770,000, possible they won\u2019t be able to borrow that much then.<\/p>\n

Of course, with high inflation, it\u2019s likely that prices may have also inflated a little in A-grade locations.<\/p>\n

From having the capacity to afford a house in Brisbane or in the more affluent suburbs of Melbourne and Sydney, they now must compromise.<\/p>\n

Downgrading from a house to a townhouse or apartment or moving that next suburb out will come at a cost.<\/p>\n

\"Valuation2\"<\/p>\n

The cost of inaction<\/span><\/h2>\n

It may not seem like a big deal, but the opportunity cost is one of the most underrated principles of investing, particularly when it some to property.<\/p>\n

In this example not only will the buyer face a reduced borrowing capacity, but a compromise may result in a reduction in any future capital growth and compounding rates.<\/p>\n

Even a 5% fall in your borrowing capacity from $800,000 to $760,000 may seem small and a fall in capital growth from say 7%, to 6% insignificant.<\/p>\n

However small things can compound into big things!<\/p>\n

In this case, this buyer would forgo more than $212,000 over the next decade and considerably more the decade after.<\/p>\n

While it is not an exact science, it should be evident there will be substantial costs involved.<\/p>\n

Fast forward and an opportunity cost of acquiring further funds to put towards another investment may also be missed.<\/p>\n

The knock-on effect is not small or insignificant when magnified over decades.<\/p>\n

\"Home<\/p>\n

In conclusion<\/span><\/h2>\n

There is no doubt that there are many question marks on what lies ahead.<\/p>\n

It is enough to make even the most seasoned investor a little nervous.<\/p>\n

But understanding the levers that are in place and how they may affect your decision to wait is critical.<\/p>\n

For some, it may make no difference, but I would suggest for the majority it will come at a significant cost.<\/p>\n

With interest rates and inflation rising, borrowing capacities will decrease and assets may appreciate.<\/p>\n

These buyers may be to compromise on their asset selection or be left in the cold together in a vastly different environment down the track.<\/p>\n

For those buyers, now is NOT the time to pause your search.<\/p>\n

Instead, take a long-term approach, get the basics and fundamentals right, and Carpe Diem<\/strong>!<\/p>\n