I have been procrastinating for the longest time to start the process of buying an apartment and at long last have physically started the arduous journey to my future home a few months ago. You see, there is really no point in renting because one cannot do it forever and since property prices will only rise over time, it makes perfect sense for me to buy sooner than later. Some people might want to continue to rent and use their savings for investments that yield higher returns (ie. higher risks too) and then buy as good a piece of property as they can get with their investment earnings while others simply earn a living through buying, selling and renting out properties. For me, I am quite risk-averse so I am happy with saving my guts out so as to quickly buy a place to live in, finish paying the mortgage as soon as possible and then moving on to continue putting my money into high interest savings accounts (ie. a risk-free investment). Of course I am also open to upgrading to a better place in the future if I can afford it.
It is really hard for me to find an ideal apartment because of my numerous requirements presented in the following order of decreasing priority:
- It has to be in the city
- It has to be within walking distance to any station that serves the line to my workplace
- It has to get the nod from Ision
- It has to have 2 bedrooms or at least 1 bedroom and 1 study
- It has to have a reasonably-sized balcony
- It has to have a split-level loft-like layout
- It has to not come with amenities like concierge, gym, pool, spa, etc
- It has to not come with a car space
- It has to be within walking distance to the supermarket and gym
I have so far not come across a single place that meets all (not even most) of the above requirements that is within my budget but I know I must be patient (ie. at least a year should be given) since I definitely do not want to end up regretting what I have purchased. Some people think that the commitment made to a bought property can actually be more important than that made between partners and I think I agree to a certain extent. I just know that a lot of research and thought has to be put into the process.
I cannot say that I am a seasoned property-hunter at the moment but I have learnt a thing or two throughout this stressful-at-times hunt:
- Although not compulsory, it is important to engage the services of a solicitor and mortgage broker (the latter is paid by the lender not the client). However always check what they say with a neutral third party as they tend to have their own agenda to push across
- Stamp duty (ie. tax on your purchase. Can you imagine that?) can be avoided for properties less than $500,000 and reaches a maximum value at $600,000
- An offset home loan has an associated savings account that earns no interest but is used to offset the loan principle to minimise the payable interest
- Every time you apply for a pre-approval or renew an expired one, your credit report suffers one hit (zero hits equals a perfect record)
- To avoid mortgage insurance, you must not borrow more than 80% of the value of the property assessed by the bank, NOT 80% of the actual purchase price
- The Australian cash rate used to be as high as 17% back in 1990 when the science of inflationary control was still not very well-understood
- Take the price printed on advertisements with a huge pinch of salt for they are there simply to entice you to the property
- 90% of auction attendees are there to just watch and not bid–many of them are from neighbouring units and are there just to see how much their property is worth currently
- The mineral boom and national broadband project will increase demand for workers in the next few years driving wage rates higher which will increase inflation and will subsequently be curbed by an increase in cash rate by the Reserve Bank. This means that interest rates will have a net rise in the next few years assuming the banks can secure enough offshore funds to lend.
Recently the Reserve Bank has increased the cash rate by 0.25% and the banks subsequently raised their loan interest rates by twice of that (even an interest rate hike four times that of the cash rate is apparently not uncommon) without increasing their savings/term deposit interest rates. My pre-approved home loan rate increased from 6.57% to 7% and it expires in about a month. Since all signs point towards further interest rate increases and I can already see property prices starting to drop (which means that my current rent will soon increase. Darn!), I will continue to keep my eyes open (and maybe start considering off-the-plan apartments) and put in aggressive bids/offers when good things come along in this buyer’s market. Just in case that you find all this sounds exciting, trust me, it is not!