Navigating the property market can be both exhilarating and daunting, especially for those looking to purchase their first house. But before you take the leap, it’s important to set yourself up for success and avoid the obvious pitfalls. Understanding how people talk about property prices and the overall property market can help you make informed decisions and secure a property that meets your needs and aligns with your financial goals. In this article, we’ll touch on some of the crucial things to consider before you buy your first home.
1. Understand how people talk about the market
If you look at a lot of websites, you’ll start to see that there are certain ways that people talk about the market. They might talk about the number of houses currently for sale, or the median price. The instinct is to start comparing these numbers and to make a decision based on those, but don’t be fooled. Just because people are talking about these numbers, it doesn’t mean that they’re relevant to you.
One example of this is the median price of property. You might think that this is the average price, but it isn’t. The median price is the equivalent of lining up the prices of the properties for sale and finding the price in the middle of the list. What’s the difference? It means that a shift in the median price may only reflect a change in the value of the houses for sale. If cheaper houses are being snapped up but the more expensive houses aren’t, the median price will go up. But in that case, all that reflects is that the upper end of the market is moving slower or has more properties than the lower end – it doesn’t mean that property values are going up in the area.
2. Look to the past instead of just the future
The example of median pricing is a reminder that to understand changes in an area, you need to know what has happened there in the past. Massive reduction in the number of available properties? Is that because the suburb has become more popular, or are there problems with building new properties and a bunch will hit the market in the next few months? Have a large number of properties just changed hands and now people are settling in? Is there something else going on?
You also need to consider this with house prices. Maybe all the houses sitting on the market are worth a lot, but is that because that’s what the houses are worth, or are they overpriced? Review past sale prices, for as long as you think is relevant, and look at what might be impacting those prices. Compare those changes with an area that you’re familiar with to see if it’s a comparable rate of change.
3. Know what’s valuable to you
Don’t get caught up trying to have it all. Properties that have access to everything a person could want will cost much more than other places where there is some compromise. You might understand how a pool could add value to a property, but if you won’t use it, there’s no point in paying extra for a property with a feature that’s expensive to maintain that won’t bring you any extra utility or enjoyment.
Understand that you will be paying for premium access to services and features, regardless of whether you use them or need them. For example, if you’re close to the local hospital, that will likely be reflected in the value of the property. The same goes for being in a desirable school catchment zone, or being near a large feature such as a lake or a park. If these things aren’t important to you, then it might be worth looking at other suburbs that can offer you the features you want without having to pay extra.
Conversely, if the house isn’t perfect but checks other boxes, be open to the possibility of needing to do some work to make it perfect. A house with an outdated kitchen might mean that you’ll need to renovate, but the upshot is that the property will probably be cheaper because of that, and now you’ll be able to make it perfect for your needs in the fullness of time through renovating.
4. Do your due diligence
In a competitive market, your instinct when you find something you want is to lock it down as soon as possible. Don’t do this. Buying a house does have an emotional component, but it’s a huge financial investment first and foremost. Don’t let your heart lead your wallet. Go and see the house multiple times if you can, and get the building checked out by a professional. Make sure it’s not about to fall down, and know what the potential problems could be.
Also, see what the area is like at different times of the day. Go in the morning, go in the evening. What’s it like at peak traffic time? Are people partying at 2am on Saturday morning? If you aren’t familiar with an area, you might want to make sure that you aren’t being misled about the noise levels or overall vibe of the neighbourhood.
5. Get your financial ducks in a row
Part of knowing how to place your expectations is to know what you can or can’t borrow. Make sure that you understand the likelihood and the impact of interest rate changes over the life of the loan, and make sure that you can manage those. You also need to be aware of the extra charges associated with buying a house, including things like rates, increased insurance coverage and emergency repairs if something goes awry. Understand what your options are, and how your finances are likely to change in the future. Think about contingencies and try to set yourself up as best you can to avoid financial strain. You can do this through your own research, but it might be wiser to talk to a finance expert if you can.
By learning more about the market and keeping your expectations realistic, you can avoid some of the common pitfalls of first-time property ownership. Remember to delve deeper into market indicators, assess the past trends, and prioritise what truly matters to you. With these steps, you can make informed decisions and buy a home that aligns with your needs and goals without paying too much for something you don’t need.