You would have read reports that house prices are falling in certain areas. If you already own a property and feel financially comfortable, your first thought might be, “Perhaps this is a good time to buy another one.” Pick up an investment, use some equity and take advantage of a lower price.
The problem is that the purchase price is only one part of affordability. Interest rates, income, existing debts and living expenses all have a say. Unfortunately, none of them are obliged to cooperate just because you have spotted a bargain.
Analysis reported this month puts the national price fall at 6.7 per cent while the average buyer’s borrowing power has fallen by 10.5 per cent following rate rises. The seller may be asking for less but the bank might be offering you even less.
For existing owners, there is another uncomfortable detail. We welcome falling prices on the property we want to buy while assuming our own is somehow immune. Ours is better maintained, the kitchen is newer and the agent said it was worth more last summer. Somehow the market has fallen for everyone except us.
Business owners do this too. A tradie finds a discounted ute and immediately starts calculating the saving. How much they still need to spend receives considerably less attention. A good purchase price helps but the repayments, running costs and pressure on cash flow remain.
Falling prices can create opportunities for buyers whose finances support the purchase but before getting attached to another property, check your current borrowing capacity, usable equity, repayments and ongoing costs.
A lower asking price is welcome. So is a discount on a ute, a machine or a warehouse full of stock but the saving only helps if you can afford what comes with it. Otherwise, you have just found a cheaper way to put yourself under pressure…